Pos Deutsche Postbank 2009 Group Annual Report

Deutsche Postbank 2009 Group Annual Report

Postbank Group in figures 2009 2009 Group Annual Report

Jan. 1 – Dec. 31, 2009 Jan. 1 – Dec. 31, 2008 1

Consolidated income statement Total income €m 3,088 2,288 Administrative expenses €m – 2,864 – 2,969 20 Loss before tax €m – 398 – 1,064 Consolidated net profit/loss €m 76 – 886

Deutsche Postbank AG Total cost/income ratio % 92.7 129.8

Return on equity before tax % – 7.8 – 23.3 after tax % 1.5 – 19.4

Earnings per share € 0.35 – 5.26

Dec. 31, 2009 Dec. 31, 2008 1

Consolidated balance sheet Total assets €m 226,609 231,219 Customer deposits €m 111,067 95,077 Customer loans €m 108,971 101,228 Allowance for losses on loans and advances €m 1,641 1,323 Equity €m 5,251 4,952

Tier 1 ratio % 7.6 7.2

Headcount (FTEs) thousand 20.86 21.13 09 Long-term ratings Moody‘s Aa3 Aa2 outlook rating under review stable Standard & Poor‘s A– A– outlook positive positive Fitch A+ A outlook stable negative

Information on Postbank shares Dec. 31, 2009 Dec. 31, 2008 Share price at the balance sheet date € 22.88 15.50 Share price (Jan. 1 – Dec. 31) high € 26.86 67.10 low € 6.81 12.19 Market capitalization on December 31 €m 5,006 3,391 Number of shares million 218.8 218.8

1 Prior-period figures restated (see Note 6) 678 110 008 Deutsche Postbank 2009 Group Annual Report

Postbank Group in figures 2009 2009 Group Annual Report

Jan. 1 – Dec. 31, 2009 Jan. 1 – Dec. 31, 2008 1

Consolidated income statement Total income €m 3,088 2,288 Administrative expenses €m – 2,864 – 2,969 20 Loss before tax €m – 398 – 1,064 Consolidated net profit/loss €m 76 – 886

Deutsche Postbank AG Total cost/income ratio % 92.7 129.8

Return on equity before tax % – 7.8 – 23.3 after tax % 1.5 – 19.4

Earnings per share € 0.35 – 5.26

Dec. 31, 2009 Dec. 31, 2008 1

Tier 1 ratio % 7.6 7.2

1 Prior-period figures restated (see Note 6) 678 110 008 Milestones in fiscal year 2009 Financial Calendar 2010 Contacts Milestones 200 9/ Financial Calendar 2010

I February 5, 2009 Postbank issued its third Jumbo Hypothekenpfandbrief with a volume I March 15, 2010 Publication of 2009 Group Annual Report Published by Design and layout of €1 billion and a five-year term. Deutsche Postbank AG EGGERT GROUP, Düsseldorf Head Office I April 29, 2010 Annual General Meeting, Frankfurt am Main Investor Relations Coordination/editing I March 9, 2009 Deutsche Bank AG announced that it holds a 25 % stake plus one share Friedrich-Ebert-Allee 114 – 126 Postbank in Postbank. The shares were primarily purchased in the transaction with 53113 Bonn, Germany Investor Relations Deutsche Post AG. I May 12, 2010 Interim Report for the first quarter, analyst conference call Postfach 40 00 53105 Bonn, Germany Translation

I April 22, 2009 Postbank‘s Annual General Meeting was held in Frankfurt am Main. I August 4, 2010 Interim Report for the first half-year, analyst conference call Phone: +49 228 920 - 0 Deutsche Post Corporate Language All motions were approved by large majorities. Services et al. Investor Relations I May 29, 2009 At its meeting, the Supervisory Board of Deutsche Postbank AG appointed I November 11, 2010 Interim Report for the third quarter, analyst conference call Phone: +49 228 920 180 - 03 Stefan Jütte to become the new Chairman of the Bank’s Management Board E-mail: [email protected] www.postbank.com/ir effective July 1, 2009. Before this appointment was made, the Supervisory Board and the Chairman of the Management Board at the time, Wolfgang Klein, decided under amicable conditions and by mutual agreement that he would step down on September 30, 2009, after nine years of successful service at Postbank. Dirk Berensmann, Management Board Member serving as COO for the IT/Operations division, and the Supervisory Board of Postbank reached an agreement on the end of his responsibilities effective May 29, 2009. He was succeeded on May 30, 2009 by Mario Daberkow, who previously oversaw Transaction Banking at Postbank in his capacity as Executive Manager.

I July 3, 2009 Postbank issued its first public-sector Pfandbrief with a volume of €1 billion. On August 20, 2009, the total was increased to €1.5 billion.

I November 26, 2009 Postbank announced as part of a sharpening of its strategic focus that it intended to achieve an operating return on equity after taxes of about 13 % over the medium and long term. To strengthen its equity base, Postbank intends to retain its earnings through 2012. No responsibility is taken for the correctness of this information – the right is reserved to make changes at short notice.

This Annual Report contains forward-looking statements that relate to macroeconomic developments (in particular the development of money and capital market rates), the business and the net assets, financial position and results of operations of the Postbank Group. Forward-looking statements by definition do not depict the past and are in some instances indicated by words such as “believe”, “anticipate”, “predict”, “plan”, “estimate”, “aim”, “expect”, “assume” and similar expressions. Forward-looking statements are based on the Company’s current plans, estimates, projections and forecasts and are therefore subject to risks and uncertainties that could cause actual development or the actual results or performance to differ materially from the development, results or performance expressly or implicitly assumed in these forward-looking statements.

Readers of this Annual Report are expressly cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this Annual Report. Deutsche Postbank AG does not intend and does not undertake any obligation to revise these forward-looking statements.

The English version of the Group Annual Report constitutes a translation of the original German version. Only the German version is legally binding. Milestones in fiscal year 2009 Financial Calendar 2010 Contacts Milestones 200 9/ Financial Calendar 2010

I July 3, 2009 Postbank issued its first public-sector Pfandbrief with a volume of €1 billion. On August 20, 2009, the total was increased to €1.5 billion.

The English version of the Group Annual Report constitutes a translation of the original German version. Only the German version is legally binding. Deutsche Postbank AG 2009 Group Annual Report

The Postbank Group, with 14 million customers and around 21,000 employees, is one of the largest financial service providers in Germany. In addition to our core business with private customers, we also serve corporate customers and are active in the fields of transaction banking and financial markets.

The positive development of our operating business in the past few years can be attributed in particular to an attractive range of products tailored to the needs of our target groups and the structure of our sales organization, which is unique on the German banking market. We intend to build on these strengths to further enhance our innovativeness and service quality. Our goal is to continue to stay one step ahead of the market, with innovative new products and processes as well as excellent services.

To a much greater degree, however, we owe our success to our clients, who have given us their trust. Trust is established through transparency and dialog. That’s why we want to use this annual report to provide clear information about us and our business. We also want to show that we understand – and fulfill – our role as a customer-oriented service company. Contents

Postbank Group 2009

For our Shareholders Our Business Divisions Our Responsibility

4 Letter to our 16 Retail Banking 22 Report of the Shareholders Supervisory Board 18 Corporate Banking 6 Management Board 26 Annual Corporate 20 Transaction Banking Governance Statement 8 Shareholders and Stock 21 Financial Markets 38 Employees 12 Strategy – Interview with the 40 Sustainability Chairman of the Management Board

Postbank Journal Fiscal Year 2009

Group Management Report Consolidated Financial Other Information Statements

44 Business and 95 Consolidated Statement 165 Consolidated Income Environment of Comprehensive Income Statement Quarterly Overview 45 Disclosures in accordance 96 Consolidated Balance with section 289(4) and Sheet 166 Consolidated Income section 315(4) of the HGB Statement and explanatory report 97 Statement of Changes Multi-Year Overview in Equity 46 Remuneration of the 167 Consolidated Balance Management Board and 98 Consolidated Cash Flow Sheet – the Supervisory Board Statement Multi-Year Overview

48 Employees 100 Notes 168 Segment Reporting – Multi-Year Overview 48 Macroeconomic 133 Segment Reporting environment in 2009 (Note 40) 170 International Financial 164 Auditors‘ Report Reporting Standards 50 Net Assets, Financial (IFRSs) Position and Results of Operations 172 Executive Bodies

53 Segment Reporting 174 Group Structure

55 Total Assets 176 Glossary

56 Report on Post-Balance 182 Contact Details Sheet Date Events

57 Risk Report

90 Report on Expected Developments

Key Cover foldout

Cross-reference 123 C2 Key data with page number C3 Milestones @ Reference to Internet C3 Financial Calendar

Reference to service C4 Contacts The year of 2009 was a difficult one for nearly all industry and service sectors, and the banking industry was no exception. Although the financial markets did show the first signs of normalization after the escalation of the crisis at the end of 2008, the effects increasingly began impacting the real economy in 2009 and have led to substantially increased risk provisioning primarily in the corporate sector and in commercially-used real estate finance.

These adverse conditions in the business environment also impacted earnings in the Postbank Group. Even though customer business performed well, particularly in the German Retail Banking and Corporate Banking segments, the income statement was hit by negative effects from the Bank’s risk positions caused by the unfavorable external factors. As expected, the extent of these crisis-related negative effects was considerably less than in 2008. Postbank was thus able to end fiscal year 2009, taking positive tax effects in account, with a consolidated net profit of €76 million after experiencing a substantial loss in the previous year. In 2009, the loss before tax remained an unsatisfying €398 million. This figure, however, does not take into account the development of spread and market interest rates, which contributed to substantial present value increases in banking book investment securities. Such increases have not been recognized in the consolidated income statement. This positive development is also reflected in the consolidated statement of comprehensive income, which must be reported under IFRSs.

In 2009, the customer business experienced a generally successful year in its key product and business areas in spite of the persistently tough competition. In Retail Banking, we concentrated during the year under review particularly on our critically important savings business and succeeded in gaining significant shares of the market. Thanks to the strong inflow of new money, total volume rose 16.5 % to €57.2 billion. We view this trend as an expression of customer confidence in Postbank. In the lending business, we played a major role in safeguarding the loan supply in Germany. Our customer loans business grew by 7.7 %. A key contribution to this development was made by our SME lending business, which rose by €1.6 billion even with strict adherence to our criteria for granting loans. Thanks to our good liquidity situation, among other things, we were able to fill gaps left behind by other banks.

We intend to reinforce and expand our good position in customer business by drawing upon the “Postbank4Future” strategy program that we announced at the end of 2009. The implementation of this program will result in a systematic focus on our product range and, as a result, a streamlining of processes. This step will return us to our roots as a provider of traditional banking products and services that stand out for their security, accessibility, clarity and transparency.

Thanks to the new direction of our product portfolio and the resulting business opportunities, Postbank will expand its service and advisory role. One major focus of this work will be increasing customer satisfaction by taking such steps as improving accessibility and cash withdrawal opportunities. Details about these plans can be found in this Annual Report.

4 Postbank Group I Letter to our Shareholders For our Shareholders For our Shareholders An unsere Investoren

Slimming the product range and streamlining processes will also create other opportunities for increasing efficiency, and we intend to systematically exploit this potential. Our strategic program aims in this respect at a further reduction of our administrative costs by 2012. Our Business Divisions Unsere Geschäftsfelder

We will continue with the program begun in the prior year to reduce our risk exposures by decreasing investment securities by almost 13%. The strengthening of our equity base will also continue to be a focus of our strategic activities. The steps taken since the outbreak of the financial market crisis have already resulted in an increase in our Tier 1 ratio and a reduction in its volatility. At the end of 2009, the ratio was 7.6 %, or 0.4 of a percentage point above the level of December 31, 2008. To reach our target of 10 % by the end of 2012 pursuant to the current valid definition, we will intensely work on the introduction of refined risk measurement models. Moreover, Postbank intends to fully utilize the profits generated in fiscal years 2009 to 2012 to reinforce its Our Responsibility Our Responsibility equity base. For that reason, we will recommend to the 2009 Annual General Meeting that once again no dividend be paid. We hope that you, our shareholders, will understand.

Postbank’s shares performed well last year. With a gain of about 48 % to €22.88, the Postbank share outperformed both the DAX and MDAX in 2009, following the severe drop in share price in the previous year. In a direct market comparison with the average of European banks that, like Postbank, concentrate on Retail Banking, Postbank’s share performed significantly better, rallying at around 18 percentage points higher than the competitors’.

We are confident that for 2010 Postbank will be able to report a profit before tax once again. Diminishing

negative effects from the capital-market crisis, a reduction in the allowance for losses on loans and advances Group Management Report compared with 2009, forceful cost management and, above all, our solid revenue streams from our customer business should contribute to this effort. The prerequisites for achieving this goal, however, are capital markets and a macroeconomic environment that see no measurable slowdown. I pledge to you that we are intensely working both in and out of the framework of our strategy program to measurably improve Postbank’s earnings situation.

I would like to thank you for the support you have provided to Postbank and would welcome your continued trust in us. Consolidated Financial Statements Bonn, March 15, 2010

Sincerely, Other Information Stefan Jütte Chairman of the Management Board

5 Management Board of Deutsche Postbank AG

6 Postbank Group I Management Board For our Shareholders For our Shareholders An unsere Investoren Our Business Divisions Unsere Geschäftsfelder Our Responsibility Our Responsibility Group Management Report Consolidated Financial Statements Other Information From left: Mario Daberkow, Horst Küpker, Hans-Peter Schmid, Michael Meyer, Marc Hess, Stefan Jütte (Chairman), Ralf Stemmer

7 Shareholders and Stock: Postbank shares perform well

I Stock markets record significant gains Global stock markets for 2009 as a whole presented a pleasing picture. Rather than displaying a linear trend, however, market performance was characterized by erratic fluctuations. After stock markets fell to fresh multi- year lows during the first months of the year as a result of the steep economic downturn, sentiment turned in March. Massive intervention from global central banks, supervisory officials and governments — in particular low interest policies and economic stimulus packages — helped restore faith in the capital markets. At the same time, early indicators and economic data continuously improved beginning in the spring of 2009. Since then, investors have recovered their risk appetite and many of them have ventured out of the safe havens of sovereign bonds and money markets. Germany’s blue-chip DAX and mid-cap MDAX indexes closed the year of 2009 with gains of about 24 % and 34 %, respectively.

After the steep share price declines of the prior year, bank stocks outperformed the broad market in 2009, but also displayed significantly more volatility. Initially, everything seemed to point to another crisis year. Financial sector indexes such as the Euro Stoxx bank index had plunged by about 40 % at the start of March. Despite historically low valuations, market participants displayed scant interest given daunting concerns about the potential liabilities still facing companies. In March, the stabilization measures previously mentioned began showing an effect. Bank shares, which had been put under particularly high pressure since the start of the financial crisis, staged an above average recovery during the year. The Euro Stoxx bank index gained about 49 % for the entire year of 2009, with the rally led by investment bank stocks.

I Postbank shares advance substantially After a clear decline in the share price performance in 2008, the Postbank share in 2009 substantially outperformed both the DAX and the MDAX, with a gain of about 48 %, rising from €7.38 to € 22.88. In a direct peer- group comparison with the average of European banks that, like Postbank, focus on the retail business, our share likewise performed significantly better, rallying at around 18 percentage points higher than competitors’.

Performance of Postbank stock since the initial public offering (June 23, 2004 to December 31, 2009) ■ Postbank ■ DAX Values linked to index, Postbank IPO price on June 23, 2004 of ¤28.50 = 1001 ■ MDAX ■ Peer group2

260 240 220 200 180 160 140 120 100 80 60 40 20

06/25/04 07/01/05 07/07/06 07/13/07 07//18/08 07/24/09 24/31/09

Source: Bloomberg, Postbank; key see page 9

8 Postbank Group I Shareholders and Stock

Performance of Postbank stock compared with the DAX, MDAX and peer group ■ Postbank ■ MDAX For our Shareholders (Dec. 31, 2008 to Dec. 31, 2009) For our Shareholders ■ DAX An unsere Investoren Values linked to index, based on the year-end-closing = 1001 ■ Peer group2

180

160

140

120 Our Business Divisions 100 Unsere Geschäftsfelder

12/31/08 01/22/09 02/13/09 03/09/09 03/31/09 04/22/09 05/14/09 06/05/09 06/29/09 07/21/09 08/12/09 09/03/09 09/25/09 10/19/09 11/10/09 12/02/09 12/24/09 12/31/09 Our Responsibility Our Responsibility

Source: Bloomberg, Postbank 1 Performance of Postbank stock and peer group excluding dividend 2 Banco Espirito Santo, Banco Popolare, Banco Popular, Erste Bank, Royal Bank of Scotland, Svenska Handelsbanken, Swedbank, Unicredit

Our stock data 2004 2005 2006 2007 20081 2009 +/– in 2009 Group Management Report Year-end closing price € 32.50 49.00 63.97 60.75 15.50 22.88 47.6 % High 2 € 34.18 50.84 65.45 74.72 67.10 26.86 – 60.0 % Low 2 € 27.73 32.16 48.21 43.41 12.19 6.81 – 44.1 % Earnings per share € 2.65 3.00 4.24 5.22 – 5.26 0.35 Price/earnings ratio 3 12.3 16.3 15.1 11.6 – 65.4 Number of shares million 164.0 164.0 164.0 164.0 218.80 218.80 unchanged Market capitalization 3 ¤m 5,330 8,036 10,491 9,963 3,391 5,006 47.6 % Beta factor (relative to the DAX) 0.60 0.73 0.95 1.03 0.94 1.25 Equity including revaluation reserve ¤m 4,766 5,061 5,207 5,225 4,952 5,251 6.0 % Consolidated Financial Statements Return on equity after taxes 9.4 % 10.3 % 14.0 % 16.6 % – 19.4 % 1.5 % Total dividend (2009: proposal) ¤m 205 205 205 205 0 0 0 Dividend per share (2009: proposal) € 1.25 1.25 1.25 1.25 0 0 0 Dividend yield 2 2.6 % 2.0 % 2.1 % – – – 3

Annual performance Other Information excluding dividend 14.0 % 50.8 % 30.6 % – 5.0 % – 74.5 % 47.6 %

1Prior-period figures restated 2 2004: June 23 to December 31 3 Based on the year-end closing price

9 I First stage of stock acquisition by Deutsche Bank concluded In the first half of 2009, Postbank’s shareholder structure changed fundamentally. Our long-standing major shareholder Deutsche Post AG (hereinafter: Deutsche Post) sold a share package to Deutsche Bank AG (hereinafter: Deutsche Bank), with the result that the latter became a new major shareholder of Postbank.

After Deutsche Post announced in September 2008 the conclusion of an agreement covering the sale of its Postbank shares to Deutsche Bank, both parties announced an altered three-step transaction structure in January 2009. Afterwards, as a first step, Deutsche Bank acquired 22.9 % of Postbank from Deutsche Post in the course of a share exchange at the start of March 2009. Deutsche Bank then informed us that it held an indirect share of 25 % plus one share in Postbank as of March 6, 2009. The two parties agreed to implement the transfer of Deutsche Post’s remaining share package of 39.5 % via a mandatory exchangeable bond (amounting to 27.4 %) and option rights (12.1 %). With these two tools, Deutsche Bank can acquire a majority stake- holding in Postbank over the medium term.

As the following chart representing Postbank’s shareholder structure as of December 31, 2009, shows, institutional investors accounted for 25.9 % of the company’s stock at the end of the reporting period (compared with 23.7 % at the end of 2008). Private investors’ confidence in Postbank also remains high. After their share of Postbank’s stock more than doubled from 5 % to about 12 % in 2008, they still held nearly 10 % of the shares at the end of 2009 – a relatively high ratio compared with previous years.

Shareholder structure of Deutsche Postbank AG

Shareholder structure Institutional investors by country 2

9.6 %, 6.3 %, other private investors 3.2 %, Luxembourg 3.6 %, Switzerland 4.4 %, Norway 39.5 %, Deutsche Post 7.4 %, France

8.4 %, Denmark

10.6 %, U.S.A. and Canada

25 % + 1 share, Deutsche Bank 1 26.4 %, Germany 25.9 %, 29.7 %, U.K. institutional investors 1As of March 6, 2009, according to a notification from Deutsche Bank dated March 9, 2009 2The chart refers to identified investors. Source: D.F. King, as of December 31, 2009

10 Postbank Group I Shareholders and Stock

I Endorsement by Annual General Meeting Our shareholders also reaffirmed their trust in our company at the Annual General Meeting. For the first time since For our Shareholders For our Shareholders the initial public offering in 2004, the Annual General Meeting was held in the Jahrhunderthalle event hall in An unsere Investoren Frankfurt am Main, Germany’s banking center, on April 22, 2009. Following a compact general debate, the Annual General Meeting endorsed all items on the agenda by a majority of more than 90%. These resolutions strengthen Postbank’s flexibility and scope of action.

As early as 2008, we had already begun gearing our business model more closely toward retail, business and corporate customers; in 2009 we consistently pressed on with this process. The “Postbank4Future” strategy program builds upon these efforts and is described in more detail in this Annual Report. It also includes plans to

retain profits to strengthen Postbank’s equity base. One result of this program will be the company’s proposal Our Business Divisions Unsere Geschäftsfelder at this year’s Annual General Meeting to refrain from disbursing a dividend for fiscal year 2009. Our Annual General Meeting will again be held at the Jahrhunderthalle in Frankfurt am Main on April 29, 2010.

I Transparency fosters trust Postbank is committed to open communications with shareholders, analysts and interested investors. In addition to the regular financial reporting in the context of quarterly and annual reports, we provide comprehensive information to retail investors through the shareholder hotline listed below and shareholder forums held by

the German shareholder association Deutsche Schutzvereinigung für Wertpapierbesitz (DSW). We maintain an Our Responsibility intense dialogue with institutional investors primarily through conferences and regular roadshows. Transparent and comprehensible information is also the key focus of our talks and conferences with analysts from more than 30 banks and securities houses.

@ Our home page also provides transparency at www.postbank.com. Aside from up-to-date information, shareholders and other interested persons can find ordering opportunities and extensive downloads as well as new technological information tools such as news feeds and podcasts. We will also be happy to answer any questions you may have regarding the Postbank share at our shareholder hotline (phone: +49 (0) 228 920 18003). Group Management Report Consolidated Financial Statements Other Information

11 Strategy: Postbank4Future – Making things simple.

Interview with Stefan Jütte

Mr. Jütte, you took over the management of Postbank in mid-2009, a time of turbulence for the entire financial sector. How do you personally evaluate your first eight months on the job?

The job was and is a real challenge. But I am enjoying it very much. I have been acquainted with the bank for years, and this enabled me to quickly get my bearings. I would also like to take this opportunity to express my sincere gratitude to my colleagues on the Management Board and all employees who have given me such tremendous support.

And how does the bank’s balance sheet look? After-tax results were marginally positive in 2009, but the pre-tax results showed a loss once again.

There is no question that such results are very dissatisfying. The persistently difficult capital-market environment resulted in further impairments on our capital market portfolios, particularly in the structured credit portfolio. In the fourth quarter, we also purposefully examined our risk exposures relating to commercial real estate finance and the structured credit portfolios where we have recalibrated the measurement parameters. This pro duced other noticeable negative effects. In the future, however, this decision is expected to have a positive impact and reduce the overall volatility in our income statement. In the lending business, however, despite the examination we conducted, we have remained within the range announced previously, and were affected much less extensively than other banks as a result of our business focus on retail-banking customers in Germany.

“We have to simplify things again, with comprehensible products and customer-friendly processes.”

Speaking of the retail banking business – how did it perform in operating terms in 2009?

We performed well with our core products. We made significant gains particularly in our savings business once again and added market share. Our lending business was also good to us in 2009. Our new business in private mortgage lending was indeed somewhat less than the previous year, but we were able to significantly expand both our portfolio and our profitability in this product area. All in all, it was a good year for the operating business.

12 Postbank Group I Strategy I Interview with the Chairman of the Management Board

This is also reflected in earnings from the customer business adjusted for the impact of the financial market crisis. Revenues from this business in 2009 almost remained at the good level achieved in the previous year. For our Shareholders For our Shareholders Nonetheless, the current low level of interest rates continues to put pressure on net interest income. In this An unsere Investoren highly competitive business segment of the German market, growth of net fee and commission income can only be achieved step-by-step. This situation is unlikely to change much in the years ahead.

How is Postbank responding to these challenges?

In the second half of 2009, we subjected our strategic approach to intense scrutiny. One clear result of this

review was that our overall business strategy, broken down into the business divisions of Retail Banking, Our Business Divisions Corporate Banking, Transaction Banking and Financial Markets, remains the right one. But it was also clear Unsere Geschäftsfelder that we must take other approaches if we are to respond appropriately to the dramatic changes occurring in the banking market, including customer behavior, and to the impact on our earnings situation. At the end of the year, we bundled the results of our review into our strategy program called “Postbank4Future”.

Would you briefly explain the key points to us? Our Responsibility Our Responsibility Certainly. The program focuses primarily on retail banking. We intend to systematically position ourselves as a bank that offers the essentials – and in this way secure our market position as the leading retail bank in Germany for the long term. Among other things, this means that we intend to become “simpler” once again, with a leaner, more transparent product range. In connection with a realignment of our distribution channels and further improvement of our customer service, we will be able to expand our market position. But this would not be a serious effort if we just relied on increasing revenues in the future. We have also been systematically managing costs in recent years – but through the simplification of our product range and through the associated streamlining of our internal processes, we have an opportunity to become even more efficient. This will result, however, in a reduction in personnel that will be carried out in a socially acceptable manner. Group Management Report

Improvements in products and service – that will be good news to customers. How quickly will they see the changes?

Very soon. In 2010, for instance, we will introduce a redeveloped checking account that will demonstrate our market leadership in product innovation as well. In addition, we will significantly streamline the product range in our savings business and make it more transparent. People interested in savings will quickly notice the

improved structure and increased clarity. We also intend to significantly improve customer service, starting with Consolidated Financial Statements the expansion of our cash-provision network and extending all the way to the acceleration of work processes in our Finance Centers. To put it concisely, we want our customers to be even more satisfied. And we will soon achieve this thanks to the obvious improvements. Other Information

13 That is a lot of activity in Retail Banking. What about the other business divisions?

We do not see any pressing need for changes in our other market segments. In Corporate Banking, we are well positioned with our SME strategy. We do not have to invent something new here. In Transaction Banking, we are also well positioned with our leadership role in the German market. We are certain that new customers will follow on the heels of HSH Nordbank, which we gained as a new customer in 2009. As a result of this new customer, we have been able to partially offset another customer’s planned termination of our business relationship. Financial Markets is also successfully doing business in another demanding market environment and has significantly helped improve our risk profile in past years.

An important subject. What sort of progress has been achieved by the risk-optimizing steps taken in 2008?

This work is right on schedule. We are concentrating on three areas here: First, maintaining our strong liquidity position. In this area, the bank is still profiting from its strong deposit business, which we expanded substantially in 2009. We also have an opportunity to issue Pfandbriefe, an option that largely frees us from expensive uncovered refinancing.

Second, we are working hard to reduce our capital-market portfolios. After the complete liquidiation of our equity holdings in the previous year, we reduced our investment securities by 12.9 % in 2009. Thanks to the balance that has now been achieved between customer deposits and loans, we will have decreased our portfolio by about 45 % by the end of 2013 compared with mid-2008.

Third, we are continuously working to strengthen our core capital. We succeeded in doing so last year. At the end of 2009, our Tier 1 ratio was 7.6 % – an appropriate level for a bank that focuses on retail banking and that has such an outstanding liquidity position in particular as we do. During the crisis, Postbank has demons trated that it is capable of successfully doing business with a low Tier 1 ratio – compared with banks employ- ing different business models – while simultaneously expanding its lending volume. Against the backdrop of current discussions about new regulations for the banking industry, we intend to further increase the Tier 1 ratio by 2012. Our target here is 10 % – based on currently valid definitions. Key steps in this process will be the introduction of advanced risk measurement procedures by the end of 2010 and the decision to stop paying a dividend to our shareholders through 2012. We consider this step to be essential because of the stricter regu latory requirements that are expected, and I hope that our shareholders will understand the reasons for it.

Let’s turn our attention to another subject: Deutsche Bank became a major shareholder about a year ago. What sort of progress have you made in this partnership?

Very good progress. Together, we have developed a series of ideas and put the corresponding measures into motion. The results, both in the working relationship in the customer business, settlement and procurement show that we will achieve our goals. In the customer business, we have primarily been able to expand our respective product ranges with complementary products of the other company. Here, Postbank benefits from its relationship with Deutsche Bank especially in the area of investment products. In return, we have made credit products available to Deutsche Bank. Joint procurement activities and improvements within the lending process are examples of the kind of successful work we are doing together in downstream units. In the months ahead, we will concentrate on deepening the working relationship further and learning from our experiences.

14 Postbank Group I Strategy I Interview with the Chairman of the Management Board

One final question: What can shareholders expect from Postbank in years to come? For our Shareholders For our Shareholders Our sustainable, mid-term target is a return on equity of about 13 % after taxes. Our strategic program will An unsere Investoren make a major contribution to this effort. In one reflection of this, our administrative costs will be cut by 5 % through 2012 compared with 2008. Given the bank’s operating earnings power and its growing customer business, I am confident that we will achieve this goal. One critical factor, however, will be the regulatory changes that are still not clearly defined. They could have a major impact on banks’ profitability.

The year of 2010 will certainly not be a “normal year” – the allowance for losses on loans and advances is likely to remain elevated compared with non-crisis years, and we are likely to see additional, but noticeably

smaller, writedowns in our structured credit portfolio. The chances are good that Postbank will once again Our Business Divisions be clearly in the black in 2010. Unsere Geschäftsfelder Our Responsibility Our Responsibility Group Management Report Consolidated Financial Statements Other Information

15 Retail Banking: Strategic decisions having an impact

With some 14 million customers, Postbank has evolved into Germany’s leading retail bank. Our success is based on our products and our four sales channels: Our national network of 852 branches, over 4,000 mobile advisers as well as direct sales through call centers and the Internet. We bundle all business related to retail customers and business customers in the the Retail Banking segment. The following section provides an overview of developments in our retail banking business in 2009.

I Checking business stable at a high level We attract and retain the greatest share of our customers through our anchor product of checking accounts. In sales, the focus lies increasingly on the value and soundness of new accounts. Even within a difficult market environ ment, around 454,000 new checking accounts were opened, almost 21 % less than in the previous year. The number of private checking accounts managed by us in 2009, 4.94 million, remained at the stable high level of the previous year. In 2010, we will again drive forward the checking business with a new and attractive product design.

I Savings volumes reach record level In addition to checking accounts, savings accounts are another major core product at Postbank. The total volume of €57.2 billion in savings deposits at the end of the year marked a new record for us, and we view this positive development as a reflection of customer confidence in Postbank in a highly competitive market. Key reasons in particular for this growth were our “Postbank Gewinn-Sparen” and “Postbank Aktiv-Sparen”, two focus products that served as the centerpiece of our marketing efforts in the first quarters. At the end of the year under review, the market share in the traditional savings business stood at 6.4 % compared with 4.9 % in the previous year.

Additional Retail Banking information

New business Book Market shares in 2009 2008 2009 2008 the book 2009 2008

1 New checking accounts thousand 454 572 Checking accounts million 4.94 4.98 % 5.3 5.4 Savings deposits €bn 57.2 49.1 % 6.4 4.9 New savings deposits (gross) €bn 17.1 12.2 Home savings deposits €bn 16.1 15.9 % 13.2 13.4 New mortgage lending Private mortgage business €bn 8.3 10.0 lending book incl. New private lending business €bn 1.45 1.62 portfolio acquisitions €bn 73.8 72.7 % 9.3 9.2 Private loan book €bn 3.6 3.0 % 2.5 2.3 Total principal disbursed €bn 9.7 10.1 Volume of New securities business €bn 2.0 2.5 securities accounts €bn 11.1 9.5 % n.a. n.a. 1Last available market data as of Dec. 2008, presumed constant market volume for the end of 2009

I Business in new home savings gains market share despite sinking volumes In 2009, the German home savings market was characterized by a decline in business – partially due to pull-forward effects resulting from a change in the German government’s housing bonuses in 2008. Overall the principals disbursed in relation to new business in the home savings market declined by 10.3 % compared with the prior year. Postbank is represented in this market by its subsidiary BHW Bausparkasse AG, which was able to partially decou- ple itself from the weak market development and increase its market share from 10.2 % in 2008 to 10.9 %. This was accomplished by generating €9.7 billion in principals disbursed in the new home-savings business, a figure that nevertheless reflects a 4.2 % drop compared with the prior year’s €10.1 billion. Riester-promoted home savings, recently introduced, underpinned this development.

I Mortgage financing increases profitability in new business New business in mortgage financing, including paid home-savings loans but excluding portfolio acquisitions, totaled €8.3 billion, nearly 17 % below the level of the previous year. This decrease was expected and resulted primarily from a change in our management of new business, which emphasizes the acquisition of new business

16 Postbank Group I Retail Banking

that is suitable for cover funds. By doing so we were able to register a satisfying development in profitability in new business. Under the BHW Bausparkasse AG brand, we thus concentrate in particular on loans with low For our Shareholders average volumes that are primarily used by our customers for renovation and remodeling projects. The DSL Bank An unsere Investoren brand is active in the cooperation-partner business and focuses on the financing of mortgages, purchases and refinancing with higher average volumes. In 2009, Postbank’s mortgage-loan portfolio increased by 1.5 % year-on-year to €73.8 billion, while improving slightly for the overall market, up 0.3 % to €788.1 billion. Our market share thus rose to 9.3 % at the end of 2009, after 9.2 % at the close of the prior year.

I Installment loan book climbs considerably Our Business Divisions Germany’s weakened economic situation led us to take a more selective approach to new installment loan Our Business Divisions Unsere Geschäftsfelder business in 2009. At the same time, the economic conditions were also associated with an overall reduction in demand among customers. The percentage of consumer car loans saw a positive change in 2009, fueled by the German government’s cash-for-clunkers program. They rose from 5.1 % in 2008 to 9.1 %. We also bolstered our cooperation business with various partners, including Tchibo, the price-comparison portal Check24, and eBay. In all, new business declined by 10.5 % to €1.45 billion. But the book climbed 20.0 % to €3.6 billion and led to an expansion of market share of 2.5 % (previous year: 2.3 %). We noted the assessment of the German magazine “Focus Money” in 2009 with satisfaction. In August, it rated the “Postbank Privatkredit” (private loan) as “very good” and ranked it second in the overall standings as a result of the very high level of advisory services and Our Responsibility Our Responsibility the attractive definition of terms.

I Securities business bouncing back With a new business total of €2.0 billion – a decrease of 20 % year-on-year – the financial market crisis in 2009 had a clear impact on the securities business in the form of a noticeable lack of buying interest among our customers. But a capital-market recovery in the second half of the year led to an observable increase in the sales of securities. Moreover, the volume of securities accounts maintained at Postbank climbed considerably. For the first time, the sales channels of Postbank offered a DWS step-up bond in the year under review, i.e., a bond with predetermined increases in interest, from X-Markets, a business unit of Deutsche Bank. We intend to complement our own product portfolio with products of strong partners again in the future. Group Management Report

I Outlook With around 14 million customers, Postbank is a one-of-a kind multi-channel operation that is well-positioned to challenge the tough competition that endures on the retail banking market. The “Postbank4Future” strategy program announced at the end of 2009 aims at consolidating and expanding our competitive position, in particular among our core products of checking, savings, home savings, mortgage lending and retirement provisions. Here we intend to precisely adapt our products and processes to better serve the needs of our customers. We will further strengthen our sales and service infrastructure as well as enter into new types of cooperation, especially in the area of nationwide cash withdrawal provisions. Consolidated Financial Statements

1 Retail Banking Segment result 2009 2008 ¤m ¤m

Total income 3,222 3,427 Administrative expenses – 2,136 – 2,220 Profit before tax 770 929 Other Information Cost/income ratio 66.3 % 64.8 % 1 see Segment comments in 53 133 the Group Management Report, Return on equity before taxes 34.9 % 41.9 % p. 53, and/or Note 40, p. 133.

17 Corporate Banking German SME market remains focus of the business strategy

In the Corporate Banking segment, Postbank bundles the services it provides in its business with corporate customers located primarily in Germany as well as in the area of national and international commercial real-estate finance.

I Further strengthening of our SME business Postbank offers its approximately 30,000 corporate customers a comprehensive portfolio of credit products, and investment and capital market options as well as payment transaction, factoring and leasing solutions. The core target group is German small and mid-sized enterprises, which we serve as a reliable, high-performance partner drawing on some 200 corporate customer advisers across Germany. In recent years, we have continuously expanded the product range tailored specifically to this target group and increased the share of customers who consider us their core bank to over 2,000. These are customers who consider Postbank an essential, long-term partner and one of the TOP FIVE banks with which they conduct the majority of their banking business in the key fields of payment transactions, investment management and/or finance.

I Increased demand for alternative forms of financing in the lending business Our intensified relationships with customers have also enabled us to further expand our lending business that we conduct on the basis of conservative guidelines. As a result, we increased the volume of SME loans issued in Germany by the end of 2009 to more than €7.0 billion (previous year: €5.4 billion) and in the process helped compensate for the lending restraint among some competitors resulting from a crisis-related shortage of liqiuidity.

In our new business with mid-term and long-term loans (excluding factoring and leasing), volumes experienced a mod erate uptick to €1.9 billion. We increased our business with overdraft facilities and money-market loans to €3.5 billion. This represents a gain of more than 46 % over the previous year.

During this past fiscal year, changed market behavior resulting from the financial market crisis prompted customers to increasingly select alternatives to traditional lending products. PB Factoring profited in particular from this trend and in a year-on-year comparison raised the volume of receivables submitted by over 33 %. As another reaction to the economic downturn in 2009, demand for Postbank’s advisory services increased significantly. In many cases, new approaches to laying a solid financial foundation were created for customers. Postbank was able to develop innovative solutions to hedge interest-rate and currency risks by more closely dovetailing activities with its subsidiary in Luxembourg. We responded to customer needs that extended beyond this area by introducing international guarantees and international cash management, which allowed us to significantly expand the range of products available in our international business.

Corporate Banking: Earnings and lending volume 30.4 2.9 Allocation of earnings Lending volume €bn Total €663m in 20091 24.3 3.5 22 %, 1.8 payment services 2.4 6.0 17.6 4.2 1.3 4 %, credit lines 13.6 2.3 12.62 2.7 9.6 4 %, other 9.3 15.9 18.0 11.3

32 %, corporate finance 2003 2004 2005 2006 2007 2008 2009 ■ Lending volume 38 %, commercial ■ Commercial real estate finance ■ Corporate finance real estate finance ■ Credit lines ■ Factoring

1Without negative effects from the financial market crisis; 2including acquisitions of PB London and PB Capital NY

18 Postbank Group I Corporate Banking

I Investment volume climbs steeply The investment volume of our corporate customers rose substantially in 2009. At the end of the year under review, For our Shareholders corporate-customer deposits totaled about €19.0 billion, nearly 43 % above the previous year’s total of €13.3 An unsere Investoren billion. The reason for this increase was the high volumes of liquidity that were held in reserve by companies in the course of the financial market crisis and distributed across various banks as a result of investment decisions. Here, Postbank’s corporate banking was able to profit to a considerable degree from customer trust.

I Continuous expansion of payment transaction services The provision and development of payment transaction solutions round out the range of services offered by Postbank’s Corporate Banking business division. To meet the needs of these largely export-oriented companies, Postbank continuously invests in the expansion and optimization of its processes and cost structures. Our Business Divisions Our Business Divisions Unsere Geschäftsfelder I Commercial real estate finance In the area of commercial real estate finance, Postbank is internationally represented by a subsidiary in the United States and a branch in Great Britain in addition to its primary business activities in the German and European markets. Business in the area of commercial real estate finance is characterized by today’s continuing difficult market con ditions and the associated increase in the need for allowances for losses on loans and advances. In new business, we responded to these conditions by issuing loans very selectively and focusing in particular on highly collateralized lending with stable cash flows. As a result, the volume of new business in the year under review, at €4.0 billion,

was at a much lower level than in 2008 (€6.8 billion). Volumes rose during fiscal year 2009 by 13 % to €18.0 billion. Our Responsibility

I Outlook Our goal in Corporate Banking is to bolster and expand our position as an important and reliable partner of German SMEs. One aspect of our strategic growth is to continuously increase the share of corporate customers who consider us their core bank.

The best conditions for accomplishing this goal are our stable customer relationships and our highly motivated and qualified employees. The strides we have achieved in recent years will help us to successfully serve as a solid partner for our customers in Corporate Banking in future years as well. Group Management Report In the area of national and international commercial real estate finance, we do not anticipate any significant improvement in the situation on global real estate markets during 2010. In new business, we will once again have a very selective approach going forward. Consolidated Financial Statements

1 Corporate Banking Segment result 2009 2008 ¤m ¤m

Total income 456 160 Administrative expenses – 180 – 171 Profit before tax – 26 – 153 Other Information Cost/income ratio 39.5 % 106.9 % 1 see Segment comments in 54 133 the Group Management Report, Return on equity before taxes – 4.8 % – 37.4 % p. 54, and/or Note 40, p. 133.

19 Transaction Banking: Excellent market position maintained

Drawing on state-of-the-art technology Postbank’s Transaction Banking business offers all processing services related to payment transactions, accounts and loans. Since 2004, we have been providing payment transaction processing services through our subsidiary Betriebs-Center für Banken AG (BCB), also on behalf of third parties. With a market share of over 20 %, BCB maintained its leading position in the processing of payment transactions in 2009 as well. During the summer, HSH Nordbank was acquired as a client, and the Postbank Group has been handling payment transactions on their behalf since February 2010.

I Transaction volumes constant Similar to the previous year, BCB handled around 7.6 billion transactions in fiscal year 2009. As expected, the number of paper-based payment transactions continued to decline. Following the start of the first phase of the Single Euro Payments Area (SEPA) with the introduction of the SEPA money transfer in January 2008, the first increases in quantity could be observed in 2009. As expected, though, this did not yet result in any significant volume. In 2010, the harmonization of Europe-wide payment transactions will enter the next phase with the scheduled introduction of the SEPA direct debit option, a step that will lead to its more widespread use. The necessary preparations have been initiated at BCB.

I Credit Services minimize risks Postbank’s Credit Services handle mortgage lending and installment loans on behalf of the Postbank Group. Standardized processes and a focus on a select number of locations provided for very high quality and productivity in the reporting year as well. The department responded to the troubled economic environment in 2009 by refining its dunning and collection activities. In order to provide optimal assistance to customers having payment difficulties, we accompany our clients from early on and offer personal support in the search for solutions. This strategy helps to reduce the default risks for the Bank.

I Outlook Since February of this year, BCB has been gradually assuming payment transaction processing on behalf of its new client, HSH Nordbank, with some 200 million transactions annually. By the end of 2010, BCB will be responsible for handling HSH Nordbank’s entire domestic and foreign payment transactions.

The client Commerzbank has announced plans to handle independently once again the payment transactions of recently acquired Dresdner Bank. This plan will be carried out in stages starting in 2010 and, according to current information, be concluded during the second quarter of 2011. BCB AG took over payment transaction processing for Dresdner Bank in 2004.

Transaction Banking1 Segment result 2009 2008 ¤m ¤m

Total income 323 344 Administrative expenses – 317 – 312

Profit before tax 39 48

Cost/income ratio 98.1 % 90.7 % 1 see Segment comments in 54 133 the Group Management Report, Return on equity before taxes – – p. 54, and/or Note 40, p. 133.

20 Postbank Group I Transaction Banking I Financial Markets

Financial Markets: Issuing of Pfandbriefe greatly interests investors

The core responsibilities of the Financial Markets segment include safeguarding the net interest margin contribution from the customer business, the generation of additional income through active risk management as well as the management of For our Shareholders Postbank’s liquidity risks. An unsere Investoren

As “the bank’s bank,” the Treasury department manages risks resulting from the customer business and is also responsible for handling the major share of Postbank’s investment securities on the capital market. In addition, the Liquidity Management department safeguards the bank’s liquidity at all times and ensures it by issuing Pfandbriefs (covered bonds) and jumbo bonds, among other things. Securities impacted by the volatility of markets are managed by the Credit Treasury department using risk-minimization strategies. The aim is to liquidate these commitments. Diversifiable credit risks are structured and transferred to the capital markets. The Capital Markets Our Business Divisions department bundles all of Postbank’s trading activities. The subsidiaries of the Financial Markets segment in Our Business Divisions Frankfurt am Main and Luxembourg are responsible for the administration and management of retail and special Unsere Geschäftsfelder funds. In addition, the Luxembourg subsidiary as a registered universal bank does business with retail and corporate customers, among other things. As part of Postbank’s sharpened focus on its core areas of expertise, the subsidiary Postbank Privat Investment Kapitalanlagegesellschaft was sold to a Dutch bank.

I Postbank retail funds are top performers In a performance comparison of retail funds conducted by Feri Trust, four Postbank funds were named among the

top performers in their respective categories (sustainability: “PB Dynamik Vision”; capital preservation: “Deutsche Our Responsibility Postbank Protekt Plus 1”; mixed funds (conservative) “Deutsche Postbank Europafonds Plus” as well as European pension funds: “Deutsche Postbank Europafonds Renten”). German retail funds earned an average of 3.4 stars according to Morning Star and were awarded first place, in contrast to selected capital investment companies. If the retail funds of Deutsche Postbank International S.A. in Luxembourg are included, Postbank funds received an average of 3.23 stars and fifth place.

I Pfandbriefe a good source of refinancing Postbank’s leading position on the German private mortgage lending market enabled the Bank to use these broadly diversified mortgage loans as mortgage bond cover for Pfandbriefe. With a AAA Best Rating from the

rating agencies S&P, Moody’s and Fitch, Pfandbriefe are an attractive source of refinancing for Postbank’s lend- Group Management Report ing business. The issuing of Pfandbriefe, including private placements demanded primarily by German institutional investors, covers the majority of the Bank’s refinancing need on the capital market. In February 2009, Postbank was the first German issuer to issue a mortgage Pfandbrief with a maturity of five years and a volume of €1.0 billion after the deterioration of the financial market crisis in the fall of 2008. Postbank announced its public Pfandbrief debut bond with a volume of €1 billion at the start of July 2009 and by August was already able to increase this amount by 500 million to €1.5 billion thanks to extremely high investor interest and a very good share price performance. Consolidated Financial Statements

Financial Markets1 Segment result 2009 2008 ¤m ¤m

Total income 178 103 Administrative expenses – 90 – 92 Profit before tax 60 – 14 Other Information Cost/income ratio 1 see Segment comments in 50.6 % 89.3 % 54 133 the Group Management Report, Return on equity before taxes 8.1 % – 2.2 % p. 54, and/or Note 40, p. 133.

21 Report of the Supervisory Board

Dear shareholders, The financial and economic crisis continued to strongly affect the sector in 2009. Changes in customer demands and a difficult market environment continue to pose tough challenges to Deutsche Postbank AG. Despite this difficult setting, Postbank was able to further expand its savings and checking accounts business in 2009. The Bank also intends to sharpen its profile over the next three years with its “Postbank4Future” strategy program as well as sustainably consolidate its position as the leading retail customer bank in Germany with an extensive package of measures. Despite, or perhaps exactly because of, its hundred year tradition, Postbank is developing ever more innovative customer- oriented solutions, such as the partnerships with Shell and OBI established in 2009 to expand the cash withdrawal opportunities. The cooperation projects for the sale of Postbank shares – launched shortly after the conclusion of the transaction between Deutsche Post DHL and Deutsche Bank – look very promising for both sides in the areas of securities and transactions.

In the past fiscal year 2009, the Supervisory Board performed the duties assigned to it by law and the Articles of Association. In addition to regularly advising and monitoring the Management Board, we were involved in important Company decisions. In fiscal year 2009, the Management Board regularly informed us in a timely and comprehensive manner of all issues concerning the Company‘s planning, business development, risks, risk management and compliance, strategic measures, as well as important business transactions and projects. Deviations between the course of business and the plans and targets prepared were explained to us and reasons given. We discussed at length all the measures requiring the approval of the Supervisory Board as well as the Company‘s strategic focus. Where required by law, the Articles of Association and the Bylaws, we passed resolutions after thorough examination and discussion. The Chairman of the Supervisory Board was also informed about important business transactions and forthcoming decisions between meetings of the Supervisory Board, and kept in constant contact with the Chairman of the Management Board. I Main subjects for discussion by the Supervisory Board In fiscal year 2009, the Supervisory Board received information at four meetings and through regular submission of documents concerning the Bank‘s current financial and strategic situation, business developments in the individual divisions, risk development, compliance and active risk management, as well as new products. The crisis on the financial market was the subject of all meetings in the period under review. The Management Board regularly provided us with detailed information about Deutsche Postbank AG‘s important commitments, their possible impact on the Bank and measures under taken. We intensively scrutinized and discussed the individual topics. All Supervisory Board members attended more than half of the meetings of the Supervisory Board that took place in the fiscal year during their time in office.

At the first meeting on March 3, 2009, we also approved the 2008 annual and consolidated financial statements of Deutsche Postbank AG after extensive discussions. This followed a prior consultation with the Audit Committee, which recommended approval. Other subjects that formed the basis for discussions and decisions by the Supervisory Board were contract issues concerning the Management Board, the joint report on Corporate Governance, the agenda and proposed resolutions for the 2009 Annual General Meeting, a report on the status of the cooperation with Deutsche Bank as well annual compliance and audit reports.

In its second meeting on May 29, 2009, the Supervisory Board discussed and passed resolutions in particular on replace ment appointments to the Management Board necessitated by the departure of Wolfgang Klein as well as the plan to reallocate duties. Other items on the meeting agenda were risk reporting including risk strategy and the report on the status of various projects in Payment Transactions and Retail Banking.

In addition to standard issues, the new call center strategy in particular was among the subjects of discussion and resolution in the third meeting of the Supervisory Board on September 25, 2009. Postbank has bundled its essential call center units into one company.

In the last meeting of the fiscal year on November 25, 2009, we focused in particular on business and mid-term planning, and on the future strategic alignment of Deutsche Postbank AG. Additional topics discussed at the meeting included consultation regarding amendments to the Corporate Governance Code and issues of importance to the Management Board, including an adjustment to the Management Board remuneration system in accordance with

22 Postbank Group I Report of the Supervisory Board

Vorstandsvergütungsangemessenheitsgesetzes (VorstAG – Management Board Remuneration Adequacy Act) and the For our Shareholders An unsere Investoren Mindestanforderungen an das Risikomanagement (MaRisk – Minimum Requirements for Risk Management in Banks). The Management Board explained the new “Postbank4Future” strategy and engaged in detailed, comprehensive discussions with us about measures and future business policy tasks, in particular in light of the financial market crisis.

Topics to be discussed and resolved at the meeting on March 10, 2010, included the 2009 annual and consolidated financial statements, the agenda items for the Annual General Meeting on April 29, 2010, the Corporate Governance Report, and issues of importance to the Management Board and Supervisory Board. Risk reporting and risk strategy as well as the audit and compliance reports continued to be items on the agenda.

We held committee votes in writing by means of seven circulated documents and exercised codetermination rights at Our Business Divisions subsidiaries within the Postbank Group. Unsere Geschäftsfelder I Work of the committees We established six committees to enable us to work in greater detail. Their task is to prepare the passing of resolutions in the Supervisory Board by offering decision-making recommendations. In addition, we have transferred certain decision-making powers to the respective committees insofar as it is legally permissible and within our competence. The committee chairs report regularly to the full Supervisory Board about the work of their committees.

Members of the Deutsche Postbank AG Supervisory Board and its committees as of December 31, 2009: Our Responsibility Our Responsibility Our Responsibility Our Responsibility

Supervisory Board Frank Appel (chair) Wilfried Boysen Peter Hoch Torsten Schulte Michael Sommer (deputy chair) Henry Cordes Elmar Kallfelz Eric Stadler Wilfried Anhäuser Edgar Ernst Ralf Krüger Werner Steinmüller Marietta Auer Annette Harms Hans-Dieter Petram Gerd Tausendfreund Rolf Bauermeister Tessen v. Heydebreck Lawrence A. Rosen Renate Treis

Executive Committee Human Resources Committee (section 10 of the Supervisory Board Bylaws) (section 13 of the Supervisory Board Bylaws) Frank Appel (chair) Tessen v. Heydebreck Michael Sommer (chair) Hans-Dieter Petram Michael Sommer (deputy chair) Eric Stadler Frank Appel (deputy chair) Renate Treis Group Management Report

Loan and Equity Investments Committee Nomination Committee (section 11 of the Supervisory Board Bylaws) (section 14 of the Supervisory Board Bylaws) Werner Steinmüller (chair) Elmar Kallfelz Frank Appel (chair) Ralf Krüger Edgar Ernst (deputy chair) Ralf Krüger Tessen v. Heydebreck Marietta Auer Renate Treis

Audit Committee Mediation Committee (section 12 of the Supervisory Board Bylaws) (section 15 of the Supervisory Board Bylaws) Peter Hoch (chair) Elmar Kallfelz Frank Appel (chair) Tessen v. Heydebreck Consolidated Financial Statements Edgar Ernst (deputy chair) Werner Steinmüller Michael Sommer (deputy chair) Elmar Kallfelz Wilfried Anhäuser Gerd Tausendfreund

The Executive Committee is responsible, among other things, for preparing the appointment and withdrawal of members of the Management Board, agreeing, amending and terminating contracts of employment for members of the Manage ment Board, granting loans to members of the Management and Supervisory Boards, addressing specific topics of overriding importance as well as fundamental questions about the Company‘s strategic direction. The committee met Other Information seven times last year. The meetings focused in particular on discussing the new Vorstandsvergütungsangemessenheits- gesetzes (VorstAG), the plan to reallocate duties, the renewal of loans extended to executive bodies and reviewing the efficiency of the Supervisory Board.

23 The Loan and Equity Investments Committee is responsible for credit decisions, fundamental questions about the granting of loans in general, the granting of loans to executive bodies as long as this does not fall within the responsibility of the Executive Committee, and certain investment decisions. It met a total of four times and, in line with its remits, discussed the approval of new loans, the extension of existing loans and increases in the lending limit for various individual loans and credit facilities. In addition, the Loan and Equity Investments Committee received reports on credit risk and regularly discussed the credit risk strategy. In all meetings in the past fiscal year, the Management Board provided detailed information to the Loan and Equity Investments Committee of developments related to the financial market crisis and their impact on Deutsche Postbank AG.

The Human Resources Committee addressed Deutsche Postbank AG‘s human resources structures and human resources development policies. The committee met once in fiscal year 2009. In the Human Resources Committee meeting, the reports on human resources given by the Management Board focused on human resources development within the Group, the age structure of Deutsche Postbank AG as well as the planned educational and training concepts.

The Audit Committee is assigned the issues of accounting, risk management, compliance, the internal control system and auditing. It met eight times in the period under review. The meetings – at which the auditors were present – focused on providing extensive support to the examination of the annual financial statements, as well as discussions of accounting and risk monitoring. The Audit Committee furthermore examined Deutsche Postbank AG‘s risk control procedures in detail and reviewed reports on audit results prepared by the internal Auditing department. Pursuant to the recommendations in item 7.1.2 of the German Corporate Governance Code, the Audit Committee discussed the half-yearly report 2009 and the interim report as of September 30, 2009, with the Management Board prior to publication.

The Nomination Committee held a meeting in the past fiscal year.

The Mediation Committee did not meet in the period under review. I Audit of the annual and consolidated financial statements The auditors elected by the previous year‘s Annual General Meeting, PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Düsseldorf, audited the annual financial statements of Deutsche Postbank AG and the consolidated financial statements, including the respective management reports, for fiscal year 2009 and issued an unqualified audit opinion. They also examined the Management Board‘s report on relations with affiliated companies (dependent company report) prepared in accordance with section 312 of the Aktiengesetz (German Stock Corporation Act). The auditors reported on the results of this audit and issued the following audit opinion:

“On completion of our audit in accordance with professional standards, we confirm that 1. the factual statements made in the report are correct, 2. the compensation paid by the Company for the transactions listed in the report was not inappropriately high, nor were any disadvantages compensated, 3. there were no circumstances that would indicate a materially different assessment of the measures listed in the report to that given by the Management Board.“

Moreover, in accordance with section 317 (4) of the Handelsgesetzbuch (HGB – German Commercial Code), the auditors performed an audit of the risk early warning system to be set up in accordance with section 91 (2) of the Aktiengesetz and confirmed that the Management Board has taken measures to satisfy the requirements associated with risk strategy, risk-bearing capacity, risk control and risk monitoring, including the establishment of a suitable risk early warning system.

Deutsche Postbank AG‘s annual financial statements, the consolidated financial statements, the management reports, the proposal for the appropriation of the net retained profit, the Management Board‘s dependent company report and the auditor‘s reports were made available to all Supervisory Board members and were examined by us.

The Supervisory Board discussed these documents in the presence of the auditors, who reported on the key findings of their audit in the Supervisory Board meeting and answered questions. The Chairman of the Audit Committee reported on the results of the Audit Committee‘s examination of the annual and consolidated financial statements in the meeting of the Supervisory Board.

24 Postbank Group I Report of the Supervisory Board

We took note of and concurred with the results of the audit of the annual financial statements and the dependent company report. The final results of our examination did not give rise to any objections to Deutsche Postbank AG‘s For our Shareholders

annual financial statements or the consolidated financial statement, which were both approved. Deutsche Postbank AG‘s An unsere Investoren annual financial statements are thus adopted. Furthermore, the final results of our examination did not give rise to any objections to the declaration made by the Management Board at the close of the dependent company report. I Changes in the Management Board and Supervisory Board The following changes took place in the Deutsche Postbank AG Management Board in fiscal year 2009.

Marc Hess was appointed member of the Management Board responsible for the Finance division, effective January 1, 2009.

Wolfgang Klein resigned his seat as Chairman of the Management Board of Deutsche Postbank AG on June 30, 2009.

The Supervisory Board appointed Stefan Jütte to succeed him in this position effective July 1, 2009, as Chairman of Our Business Divisions Unsere Geschäftsfelder the Management Board.

Dirk Berensmann resigned his seat as member of the Management Board responsible for the IT/Operations division as of May 29, 2009. The Supervisory Board appointed Mario Daberkow to succeed him in this position effective May 30, 2009, as a member of the Management Board.

The following changes took place in the Supervisory Board in fiscal year 2009:

Bernd Pfaffenbach resigned from his seat as member of the Supervisory Board of Deutsche Postbank AG following the Our Responsibility Our Responsibility end of the Annual General Meeting on April 22, 2009. The time in office of Elmo von Schorlemer came to an end fol- Our Responsibility lowing the end of the 2009 Annual General Meeting. The Annual General Meeting elected Tessen von Heydebreck and Werner Steinmüller to succeed him on the Supervisory Board of Deutsche Postbank AG.

The times in office of Wilfried Boysen, Peter Hoch and Ralf Krüger were extended by vote by the 2009 Annual General Meeting. Henry Cordes, previously appointed by the court as a member of the Supervisory Board, was appointed in a by-election by the 2009 Annual General Meeting.

John Allan resigned from his seat on the Supervisory Board of Deutsche Postbank AG, effective September 1, 2009. On September 10, 2009, the local court of Bonn appointed Lawrence A. Rosen to succeed him as member of the Supervisory Board. I Corporate governance Group Management Report The requirements of the German Corporate Governance Code were also important for the Supervisory Board. In 2003, the Management Board and Supervisory Board decided to follow all the recommendations of the Corporate Gover nance Code. We also intend to implement all the recommendations of the Corporate Governance Code in the version dated June 18, 2009. The Declaration of Compliance in accordance with section 161 of the Aktiengesetz was last issued by the Management Board and the Supervisory Board on December 18, 2009, and subsequently made permanently available to shareholders on the Company‘s website. Further details on the topic of corporate governance, including 26 the wording of the declaration, are presented in the Corporate Governance report (see page 26).

We would like to thank the Management Board, employee representatives and all Group employees for their successful work. Consolidated Financial Statements

Bonn, March 10, 2010 The Supervisory Board Other Information Frank Appel Chairman

25 Annual Corporate Governance Statement (including the Corporate Governance report)

In this statement Postbank reports on its principles of corporate governance, pursuant to section 3.10 of the German Corporate Governance Code and/or Section 289a of the Handelsgesetzbuch (HGB – German Commer cial Code). This statement includes the declaration of compliance, the statements on corporate governance practices, a description of the operating principles and composition of the Management Board and Supervisory Board as well as fundamental corporate governance structures.

I Declaration of compliance For Postbank, good corporate governance means managing companies in a responsible manner based on defined values. In this respect the management bodies at Postbank attach importance to implementing the German Corporate Governance Code (CGK) as comprehensively as possible. Deutsche Postbank AG unrestrictedly complies with the Code’s latest recommendations as amended on June 18, 2009. Thus, the new requirements under section 4.2 of the CGK on the remuneration system for Management Board members were already implemented as of January 1, 2010.

The Supervisory Board and the Management Board issued the following joint declaration of compliance in accordance with section 161 of the Aktiengesetz (AktG – German Stock Corporation Act) in December 2008:

“The Management Board and the Supervisory Board of Deutsche Postbank AG state that since the last declaration of compliance dated November 28, 2008, all the recommendations of the ‘Government Commission of the German Corporate Governance Code’ in the version dated June 6, 2008 have been complied with and that they intend to continue to comply with all the Code‘s recommendations in the version dated June 18, 2009.”

The suggestions of the CGK were also implemented – with one exception: The Annual General Meeting will be broadcast on the internet only up to the moment the plenary discussions start.

I Corporate governance practices To implement corporate governance practices, Postbank has formulated a company vision and a mission as well as a table of corporate values that are meant to serve as guiding principles for determining the long-term orientation of company policy. The Bank’s vision and mission specify a normative framework for strategic and operational corporate governance and thus provide a model in equal measure for Management Board,executives and employees.

Postbank’s corporate values are recorded in the Code of Conduct, and provide principles to guide the business activities of employees in the Postbank Group. The code is binding for the Group’s executive employees. The letter and the spirit of these values are reflected in Postbank guidelines and provisions (for example in the organizational handbooks and working instructions) that determine daily business life. The code mirrors Postbank’s obligation to act responsibly, ethically and lawfully.

It has also been supplemented with a Supplier Code of Conduct.

The following seven corporate values form the cornerstone of our corporate culture: I To deliver excellent quality I To create sustainable added value for our customers I To foster openness I To act according to clear priorities I To act in an entrepreneurial way I To act with integrity internally and externally I To accept social responsibilities

26 Postbank Group I Annual Corporate Governance Statement

In addition, Postbank has pledged itself to the concept of sustainability. It acts responsibly in relation to its shareholders, customers and employees, as well as to society and the environment. In 2006, Postbank committed For our Shareholders itself to the principle of sustainable development. In January 2009, the Bank applied to join the UN Global An unsere Investoren Compact, worldwide the most respected voluntary obligation of major companies to adhere to the principles of sustainable and responsible business practices.

Postbank’s commitment is regularly reviewed by external rating agencies. In 2009, the Bank was awarded the Prime Standard in the area of Corporate Responsibility by the oekom research agency. The awarding of this hallmark of excellence means that Postbank currently belongs to the top 20 % of banks who perform best in relation to upholding their corporate responsibility. Postbank has also been environmentally certified in

accordance with ISO 14001 by TÜV Rheinland. The certificate confirms that Postbank’s environmental manage- Our Business Divisions ment system is oriented on continual improvement of its ecological performance. Unsere Geschäftsfelder

I Operating principles of the Management Board and Supervisory Board Deutsche Postbank AG is structured in accordance with the dual board system, under which the Management Board is responsible for management tasks and the Supervisory Board for supervisory and advisory duties. The shareholders exercise their rights related to company issues in the Annual General Meeting.

Management Board Our Responsibility Our Responsibility Our Responsibility Our Responsibility The Management Board has sole responsibility for the management of the Company. The Management Board members share joint responsibility for corporate management. The Chairman of the Management Board coor dinates the work of the board members.

The Management Board of Deutsche Postbank AG currently consists of seven members, who have joint responsibility for managing the Company‘s business in line with uniform objectives, plans, and guidelines. Deutsche Postbank AG is divided into board departments, in which the members of the Management Board act on their own responsibility but always in the collective interest of the Company. The Management Board devel ops the Company‘s business goals, its basic strategic focus, corporate policy, and the Group‘s organizational structure, and agrees on these with the Supervisory Board. The board departments of Postbank are divided as Group Management Report follows: Group Management, Finance, Retail Banking, Branch Sales, IT/Operations, Financial Markets and Resources/Lending.

The majorities required for adopting resolutions within the Management Board, the issues requiring discussion by the entire Management Board, and the responsibilities of the individual Management Board members are governed by the Bylaws of the Management Board. The Group Management Board makes decisions on issues that are of particular significance and scope for the company or the Group. Moreover, issues that a member of the Management Board presents to the Group Management Board for resolution are decided by the Group

Management Board. Consolidated Financial Statements

To promote efficient decision management, the Management Board has established committees with the power to make their own decisions or to make preparations for decisions. The Cost Management committee is respon sible for cost and budget target adherence. Decisions on acquisitions or sales of companies are prepared by the Corporate Development committee. The Retail Committee is entrusted with the implementation of the retail strategy and with sales channel controlling. The committees generally meet monthly and report to the

Group Management Board. Other Information

27 The Credit Risk Committee, the Market Risk Committee and the Operational Risk Committee are responsible for risk management and risk monitoring of the respective risks. In addition, the Bank has decided to entrust the Bank’s Risk Committee as an additional body with the task of advising the Group Management Board in the context of the determination of the Bank’s risk appetite, risk-bearing capacity, the Bank’s risk strategy as a whole as well as deciding on recommendations to limit and manage the Bank’s risk strategy as a whole. It will begin its work at the start of 2010.

Supervisory Board The Supervisory Board appoints, monitors, and advises the Management Board and is directly involved in decisions of fundamental importance for the Company. The Chairman of the Supervisory Board coordinates its work. It consists of 20 members with relevant professional experience. Ten of them are elected by the Annual General Meeting in individual elections or appointed by the courts as replacements until the next election, in accordance with the provisions of the Aktiengesetz (AktG – German Stock Corporation Act). Ten further members are elected by employees in accordance with the Mitbestimmungsgesetz (German Codetermination Act) of 1976. Seven of these Supervisory Board members must be employees of the Company, including one executive employee. The other members must be representatives of unions represented at the Company. To support it in its duties, the Supervisory Board has established six committees which report to it on their work at regular intervals. These are the Executive, Audit, Human Resources, Loan and Equity Investments, and Mediation Committees as well as the Nomination Committee. The Report of the Supervisory Board contains further details on the composition, function, 22 and meeting agendas of the Supervisory Board and its committees (see page 22).

The efficiency review of the Supervisory Board is conducted on the basis of self-evaluation and, if necessary, through additional consultations by Supervisory Board members commissioned to do this. In conjunction with the Supervisory Board office, specific suggestions for improvement are regularly elaborated in a systematic effort to further increase the efficiency of its work.

Interaction between the Management Board and Supervisory Board The cooperation of the executive bodies is governed by the Company‘s Articles of Association, which are resolved by the Annual General Meeting, the Bylaws of the Supervisory Board and Management Board, and the resolutions of the executive bodies in line with the relevant legal regulations. These lay down how the Supervisory Board should perform its supervisory and advisory duties. The Bylaws of the Supervisory Board contain a list of transactions requiring approval. The Management Board‘s information and reporting duties are laid down in both the Bylaws of the Management Board and those of the Supervisory Board. For the purpose of good corporate management and to achieve sustained growth in enterprise value, the Management Board and Supervisory Board are in regular close communication as required by relevant questions of planning, business development, the risk position, risk management, compliance and strategic measures. The chairmen of the Supervisory Board and the Management Board in particular are in regular contact.

The members of the Management Board and Supervisory Board are obliged to act in the Company‘s interests and must disclose any conflicts of interest to the Supervisory Board without delay. Conflicts of interest are to be reported to the Supervisory Board. Fundamental conflicts of interest, and not only temporary ones, in the person of a Supervisory Board Member lead to an termination of the period of office.

Annual General Meeting and shareholders The shareholders exercise their rights in the Annual General Meeting; as a rule, this is convened once a year by the Management Board, which also circulates the agenda and publishes the required reports and documents at the same time. The documents and the notice convening the Annual General Meeting are available for

28 Postbank Group I Annual Corporate Governance Statement

download on the Internet. The proceedings of the Annual General Meeting are likewise broadcast on the website, except for the plenary discussions. Every no-par value share entitles its holder to one vote. Shareholders may For our Shareholders exercise their voting rights themselves, via a proxy of their choice, or via a Company proxy acting on their An unsere Investoren instructions. The proxy voters may be contacted throughout the Annual General Meeting until the vote is taken. The resolutions by the Annual General Meeting are adopted by a simple majority of the votes cast, in the absence of binding legal requirements to the contrary. Where the law prescribes a capital majority in addition to a voting majority, votes are adopted by a simple majority of the share capital represented.

On May 8, 2008, the Annual General Meeting of Deutsche Postbank AG approved the online transmission of information to shareholders. Our Business Divisions I Other corporate governance principles Unsere Geschäftsfelder

Transparency Deutsche Postbank AG strives to provide its customers, owners, employees, and the public with comprehensive and up-to-date information. It does this on a regular basis using appropriate communication channels. To guarantee maximum transparency, and to justify and reinforce the public‘s trust, new information is disclosed to all interest groups simultaneously in the interests of fair disclosure. To this end, Deutsche Postbank AG publishes annual and quarterly reports and communicates through press releases, Investor Relations releases and confer Our Responsibility Our Responsibility Our Responsibility Our Responsibility ences, ad hoc disclosures, disclosures required by section 15a of the Wertpapierhandelsgesetz. (WpHG – German Securities Trading Act), Company reports, or the Company‘s website (www.postbank.de). Both current and historical data in German and English can be downloaded there. The dates of the principal recurring publications are published sufficiently in advance in the Financial Calendar on our website.

The members of the Management Board and Supervisory Board are obliged to act in the Company‘s interests and must disclose any conflicts of interest to the Supervisory Board without delay. If significant conflicts of interest arise, the period of office is terminated early. The Supervisory Board reports to the Annual General Meeting on any conflicts of interest that have arisen and how they were addressed. Outside activities pursued

by the members of the Management Board have to be approved by the Supervisory Board. Group Management Report

A list of the offices held by members of the Management and Supervisory Boards can be found on page 158, 158 Note 58.

Accounting and auditing The Postbank Group prepares its accounts in accordance with International Financial Reporting Standards (IFRSs). Deutsche Postbank AG’s annual financial statements are prepared within 90 days in accordance with the Handelsgesetzbuch (HGB – German Commercial Code). Interim reports are published within 45 days of

being discussed by the Audit Committee with the Management Board. Consolidated Financial Statements

PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft was elected as the auditors for fiscal year 2009 by last year’s Annual General Meeting. The auditors’ independence is reviewed and ensured, including for services already delivered or agreed. The Postbank auditors are also subject to internal rotation. In addition, the auditors are required to inform the Company’s executive bodies directly of any anomalies, and to document any errors in their audit. In particular, they must report immediately any grounds for impaired

independence during the audit and any findings that affect the Supervisory Board or indicate inaccuracies in Other Information 163 the compliance declaration. Details of the auditors’ total remuneration can be found on page 163, Note 59.

29 Compliance Postbank strives continually to further enhance its internal compliance. The primary focus of the Postbank‘s Compliance Program is to ensure adherence to statutory securities and capital market provisions. In the interests of its customers, shareholders and employees, Postbank has created a compliance organization designed to support the Management Board in its concerns for compliance with statutory provisions and internal guidelines. The Compliance Office has issued a comprehensive policy that outlines for executive bodies and employees the statutory provisions related to insider dealings and insider law, and that defines a legal framework in which deposit and investment business may be performed. In order to sharpen the awareness for compliance risk and to provide basic knowledge of compliance provisions, employees receive instruction through classroom training or learning clips.

The Management Board regularly receives essential information. Likewise, the Management Board and the Compliance Officer report to the Supervisory Board and, in particular, the Audit Committee at least once a year.

The effectiveness of the compliance function is reviewed annually by Internal Audit and the auditors.

I Risk Management The Postbank Group monitors and manages its risks through Group-wide risk management. Deutsche Postbank AG is fully integrated into this process.

The principles of responsible corporate management are also applied at Deutsche Postbank AG in dealing with risks. Postbank has installed an extensive risk management system in line with the requirements of company and banking supervision law, in order to recognize, analyze, monitor, control, and manage in a timely manner risks arising from its business activities. The system is also designed to generate the information relevant to Postbank’s risk situation at regular intervals. In order to increase its efficiency, risk management is implemented at three different levels: in the Management Board, in the Risk Committee, and in the respective operating units for risk management and monitoring. In accordance with MaRisk (Minimum Requirements for Risk Management), reports and strategies on different risk types are presented to and discussed by the Supervisory Board. Both specific and portfolio risks are managed. Postbank compares the risks from business activities with the risk-bearing capacity of the Group to allow it to judge whether they are in proportion to each other given its strategic business goals. The risk management system is continuously reviewed on the basis of current developments and adapted if necessary. The effectiveness of the system is reviewed by Internal Audit.

57 For further explanations and information on risk management, please see the Risk Report on page 57 ff.

I Remuneration report for 2009 In this report, Deutsche Postbank AG publishes the principles used to determine the remuneration of the Management Board and the Supervisory Board. In accordance with statutory provisions, the requirements of the Deutsche Rechnungslegung Standard (DRS 17 – German Accounting Standards/GASs) “Report on the Remuneration of Executive Bodies“, and the recommendations of the Corporate Governance Code, the report further explains the level of remuneration and the structure of the remuneration systems.

Remuneration is presented for each individual in a way that is generally understandable. It is divided into fixed and performance-related components.

Also shown are monetary remuneration components received by members of the Management Board for outside activities, benefits in the event of termination of their membership of the Management Board, and pension commitments. Details of shareholdings, loans, disclosure requirements under the Wertpapierhandelsgesetz (WpHG – German Securities Trading Act), and D&O insurance policies are also included.

30 Postbank Group I Annual Corporate Governance Statement

Structure of the remuneration of the Management Board in fiscal year 2009 The overall structure of the remuneration of the Management Board as well as significant contract components For our Shareholders are stipulated by the Supervisory Board of Deutsche Postbank AG, and regularly reviewed. An unsere Investoren

The Executive Committee of the Supervisory Board discusses the appropriateness of the remuneration of the members of the Management Board of Deutsche Postbank AG, taking into account the Company‘s performance, the sector, and the prospects for the future.

The level of remuneration for members of the Management Board is determined on the basis of the size and activity of the Company, its economic and financial situation, and the tasks of the board members in question. Remuneration is calculated so that it is appropriate and competitive in the national and international job mar- Our Business Divisions ket and therefore offers an incentive for dedicated and successful work. The level of remuneration is linked to Unsere Geschäftsfelder performance.

Overall remuneration consists of fixed components and a performance-related component.

The base pay (fixed components) and other compensation are not linked to performance. The base pay is paid as a monthly salary in twelve equal installments. Our Responsibility Our Responsibility The standard performance-related (variable) component consists of the annual bonus. Our Responsibility

The annual bonuses awarded to members of the Management Board are paid according to the achievement of quantitative and/or qualitative targets. These targets form part of a target agreement established at the start of each fiscal year. The size of the bonuses is based on the degree to which predetermined target values are reached or exceeded.

The size of the bonus is capped on the basis of individual agreements. The maximum annual bonus is granted where the upper target value specified for the fiscal year is reached. The variable remuneration component can exceed the fixed remuneration component. Group Management Report

The Executive Committee has the right to award members of the Management Board an appropriate special bonus for exceptional performance.

Remuneration of the Management Board in fiscal year 2009 The nine active members of the Management Board received fixed remuneration totaling €4,159.8 thousand (previous year: €4,309.3 thousand) in fiscal year 2009. The fixed component includes “other compensation” totaling €196.2 thousand (previous year: €175.3 thousand). This additional remuneration relates primarily to the use of management cars, the reimbursement of travel costs, and contributions to insurance schemes. In principle, other compensation is available to all members of the Management Board equally; the amount varies depend- Consolidated Financial Statements ing on different personal circumstances. No annual bonus was paid for fiscal year 2008.

Total remuneration for the nine active members of the Management Board was €4,159.8 thousand (previous year: €16,174.3 thousand).

The remuneration disclosed covers all activities performed by members of the Management Board within the

Postbank Group. Other Information

Deutsche Postbank AG has neither launched a stock option program, nor does it currently intend to do so.

31 The Supervisory Board of Deutsche Postbank AG and the Chairman of the Management Board Wolfgang Klein, who stepped down as of June 30, 2009, decided under amicable conditions and by mutual agreement on the termination of the Management Board contract, a decision that was below the recommendations of the German Corporate Governance Code. The contractual relationship with Wolfgang Klein will be terminated prematurely on June 30, 2010. He will receive a fixed severance payment of €2,937.5 thousand. Wolfgang Klein declined all entitlements to an annual bonus for fiscal year 2009.

Dirk Berensmann stepped down as the member of the Management Board responsible for the IT/Operations board department as of May 29, 2009. The Management Board contract with Dirk Berensmann would have regularly ended on December 31, 2009. Dirk Berensmann received neither a severance payment nor an annual bonus for fiscal year 2009.

Management Board remuneration in 2009

Fixed Performance- remuneration related component component1 Total Fixed Other component compensation € thousand € thousand € thousand € thousand Stefan Jütte, (Chairman since July 1, 2009) 700.6 14.9 0 715.5 Dirk Berensmann, (until May 29, 2009) 208.3 10.2 0 218.5 Mario Daberkow, (since May 30, 2009) 292.2 17.0 0 309.2 Marc Hess 500.0 35.3 0 535.3 Wolfgang Klein, (Chairman until June 30, 2009) 437.5 13.0 0 450.5 Horst Küpker 500.0 32.8 0 532.8 Michael Meyer 425.0 20.4 0 445.4 Hans-Peter Schmid 400.0 26.1 0 426.1 Ralf Stemmer 500.0 26.5 0 526.5 Total 3,963.6 196.2 0 4,159.8

Management Board remuneration in 2008

Fixed Performance- remuneration related component component Total Fixed Other Annual Special component compensation bonus bonus1 € thousand € thousand € thousand € thousand € thousand Wolfgang Klein 875.0 28.4 0 2,400.0 3,303.4 Dirk Berensmann 500.0 24.6 0 1,300.0 1,824.6 Mario Daberkow (until November 30, 2008) 241.7 15.2 0 900.0 1,156.9 Stefan Jütte 538.1 14.7 0 1,465.0 2,017.8 Horst Küpker (since July 1, 2008) 250.0 11.2 0 1,300.0 1,561.2 Guido Lohmann (until November 30, 2008) 229.2 19.1 0 900.0 1,148.3 Michael Meyer 350.0 16.8 0 1,300.0 1,666.8 Loukas Rizos (until June 30, 2008) 300.0 9.9 0 100.0 409.9 Hans-Peter Schmid 400.0 18.5 0 900.0 1,318.5 Ralf Stemmer 450.0 16.9 0 1,300.0 1,766.9 Total 4,134.0 175.3 0 11,865.0 16,174.3 1 Includes payment of a one-time premium (special bonus) to board members in connection with the acquisition of an investment in the Company in the amount of €11,515.0 thousand. Performance-related remuneration for fiscal year 2007 in the amount of €350.0 thousand is also included. Not including these payments, overall remuneration for the ten board members active in fiscal year 2008 amounted to €4,309.3 (previous year: €10,529.0 thousand). An annual bonus (corporate and personal performance bonus) was not paid for fiscal year 2008. 32 Postbank Group I Annual Corporate Governance Statement

New structure of the remuneration of the Management Board For our Shareholders In fiscal year 2009, the Supervisory Board intensively reviewed the remuneration system for the Management An unsere Investoren Board of Deutsche Postbank AG and approved adjustments to the remuneration system to meet new statutory and regulatory requirements. In the future, remuneration of the Management Board will be more strongly oriented to sustainable corporate development.

Overall remuneration will continue to consist of fixed and performance-related components.

The base pay (fixed components) and other compensation are not linked to performance. Base pay is paid as a

monthly salary in twelve equal installments. The additional remuneration relates primarily to the use of manage- Our Business Divisions ment cars, the reimbursement of travel costs, and contributions to insurance schemes. In principle, other Unsere Geschäftsfelder compensation is available to all members of the Management Board equally; the amount varies depending on different personal circumstances.

The annual bonus is linked to performance.

The annual bonuses awarded to the members of the Management Board are based on the achievement of quantitative and/or qualitative targets. These targets form part of a target agreement established at the start of Our Responsibility Our Responsibility Our Responsibility Our Responsibility each fiscal year (base year). The size of the bonuses is based on the degree to which predetermined target values are reached or exceeded. The size of the bonus continues to be capped on the basis of individual agreements.

In the future, the annual bonus will no longer be paid out in full on an annual basis, even when the targets agreed on have been reached.

Instead, 60 % of the annual bonus calculated on the basis of target attainment will be subject to the proviso of sustainable Group performance. Sustainability of the Group’s performance will be determined three fiscal years after the base year (sustainability phase). The long-term component will not be paid out until after the sustain Group Management Report ability phase has ended and only if the relevant sustainability criterion to be established by the Supervisory Board has been met. If the sustainability criterion is positive or equal to or better than in the base year during the sustainability phase, then the long-term component will be paid in the fourth year after the base year. Otherwise, the payment is forfeited without compensation. Remuneration of the Management Board is thus affected by negative developments in the Company during the entire measurement period (malus system).

Pension commitments The members of the Management Board benefit from individually agreed direct pension commitments.

Because each board member has a different career history, the precise arrangements differ. Consolidated Financial Statements

A pension shall be paid if the member of the Management Board leaves our service as a result of disability, death or old age. As a rule, old-age pensions are paid from the age of 62.

Under the standard pension commitments valid until February 28, 2007, pension rights generally accrue after at least five years of service. In the case of disability, this minimum waiting period may be waived in part. Other Information

33 The size of the pension depends on the length of service and the amount of pensionable remuneration. Only the fixed component of remuneration (base pay) is pensionable. The basic rule is that pension benefits of 50 % relating to the percentage of final salary accrue to members of the Management Board after five years of service. Benefits accrue at a constant rate of 2 % for each eligible year of service. The maximum level of pension ben efits (60 %) relating to the percentage of final salary is generally reached after ten years of service. The arrangements in the case of Chairman of the Management Board Stefan Jütte are different, however. The pension benefits for Stefan Jütte amount to a maximum of 50 % of pensionable income. The pension commitments further include rules for the payment of a transitional allowance for board members who leave the Company upon reaching the age limit or for reasons of disability. The benefit period is two years.

Should the Management Board contract be terminated by Postbank prior to the expiration of the regular contractual term in the cases of Mario Daberkow, Hans-Peter Schmid and Ralf Stemmer, the pension shall be calculated as if the Management Board contract had been fulfilled until its regular expiration. This shall not apply if Postbank terminates the employment relationship for good cause. The length of service of board member Mario Daberkow shall be measured from the first conclusion of a Management Board employment contract effective as of November 1, 2005.

Future pension payments will be adjusted in line with the percentage growth in the highest pay group of the collective agreement for the Verband öffentlicher Banken (Association of German Public Sector Banks). Otherwise, payments are adjusted in line with Germany’s consumer price index.

In May 2007, the Executive Committee of Deutsche Postbank AG’s Supervisory Board resolved to restructure the pension arrangements for members of the Management Board appointed after March 31, 2007, from the previous final salary-based pension system to a defined contribution plan. The pension commitments of the members of the Management Board appointed after that date, Marc Hess, Michael Meyer and Horst Küpker, are therefore based on the following basic system: A benefit contribution is granted for each eligible year of service. This benefit contribution is credited to a virtual pension account that bears interest annually at the relevant interest rate used in the assessment for tax purposes of direct pension commitments from the time of the grant until the insured event. When the insured event occurs, the amount of the pension is determined by distributing the pension assets accumulated in the pension account across the expected benefit period of the pension in accordance with actuarial principles. There is no waiting period and entitlements from pension commitments are vested immediately. Pensions have a 1 % p.a. adjustment rate.

Members of the Management Board Michael Meyer, Marc Hess and Horst Küpker have the right to choose between regular pension payments and a lump-sum capital payment.

Pension commitments for individual members of the Management Board

Pension commitments Percentage of final salary Maximum percentage of Service cost for pension as of Dec. 31, 2009 final salary obligations % % €

Stefan Jütte (Chairman) 25.50 50.00 0 Hans-Peter Schmid 0 60.00 222,646 Ralf Stemmer 50.00 60.00 70,392 Mario Daberkow 0 60.00 93,165

34 Postbank Group I Annual Corporate Governance Statement

Mario Daberkow and Hans-Peter Schmid have not yet completed their respective waiting periods. As of the end of fiscal year 2009, they therefore have no entitlement to an old-age pension under these arrangements. For our Shareholders An unsere Investoren

Contribution amount Pension account balance Service cost for pension for 2009 as of Dec. 31, 2009 obligations € € €

Horst Küpker 125,000 334,043 97,303 Michael Meyer 87,500 456,335 71,825 Marc Hess 125,000 290,006 100,953 Our Business Divisions The remuneration paid to former members of the Management Board and their dependents amounted to Unsere Geschäftsfelder €4.68 million (previous year: €16.42 million).

The defined benefit obligation (DBO) for current pensions, calculated in line with international accounting principles, totals €55.42 million.

Remuneration of the Supervisory Board Our Responsibility Our Responsibility Deutsche Postbank AG’s Annual General Meeting last changed the remuneration of the Supervisory Board in 2004, Our Responsibility adjusting it in line with the Corporate Governance Code. The remuneration system is laid down in Article 15 of the Articles of Association of Deutsche Postbank AG. In accordance with this article, the annual remuneration of members of the Supervisory Board consists of fixed and performance-related components, plus a performance- related component with a long-term incentive effect. This reflects the responsibilities and scope of activity of the Supervisory Board’s work and the economic performance of Deutsche Postbank AG. The positions of chair and deputy chair as well as membership of a committee are reflected in the remuneration.

€0.03 by which the consolidated net profit per share for the respective fiscal year exceeds the amount of €2.00. Group Management Report Members of the Supervisory Board will be entitled to performance-related remuneration with a long-term incentive effect amounting to €300 for each 1% by which the consolidated net profit per share for the second fiscal year after the current fiscal year exceeds the consolidated net profit per share for the fiscal year prior to the current fiscal year.

members of the Supervisory Board committees additionally receive half this amount for each such position held. Consolidated Financial Statements This does not apply to membership of the Mediation Committee and the Nomination Committee.

The members of the Supervisory Board are entitled to claim out-of-pocket expenses and any value-added tax expenses incurred in the exercise of their office. In addition, each member of the Supervisory Board attending a meeting receives an attendance allowance of €250 for each meeting of the full Supervisory Board or of one of the committees. Other Information The amount of the Supervisory Board’s remuneration is capped in several aspects: Neither of the two variable components may exceed the value of the fixed annual remuneration. Furthermore, the short-term variable component

35 may not exceed in total 0.5 % of the Company’s net retained profit less 4 % of contributions made on the lowest issue price of the shares. In addition, remuneration of committee members may not exceed twice the remuneration of the Supervisory Board member concerned.

Supervisory Board members receive the remuneration after the Annual General Meeting. Persons who are members of the Supervisory Board for only part of a fiscal year receive the corresponding remuneration ratably.

The total remuneration including attendance allowances paid to members of the Supervisory Board for fiscal year 2009 amounted to €536.3 (previous year: €526.2 thousand). As concerns earnings-related remuneration, the Supervisory Board only received the fixed remuneration.

The total remuneration paid to the individual members of the Supervisory Board was as follows:

Remuneration for fiscal year 2009 Remuneration for fiscal year 2008 Member of the Fixed Variable Attend- Total Fixed Variable Attend- Total Supervisory Board remun- remun- ance remun- remun- ance eration eration1 allowance eration eration1 allowance € thousand € thousand € thousand € thousand € thousand € thousand € thousand € thousand

Frank Appel 52.5 – 2.8 55.3 45.5 – 2.5 48.0 Michael Sommer 45.0 – 1.8 46.8 45.0 – 1.8 46.8 John Allan 10.0 – 0.3 10.3 9.8 – 0.5 10.3 Wilfried Anhäuser 22.5 – 2.5 25.0 22.5 – 2.5 25.0 Jörg Asmussen – – – – 6.1 – 0.3 6.4 Marietta Auer 22.5 – 2.0 24.5 22.5 – 2.5 25.0 Rolf Bauermeister 15.0 – 1.0 16.0 15.0 – 1.3 16.3 Wilfried Boysen 15.0 – 1.0 16.0 15.0 – 1.3 16.3 Henry Cordes 15.0 – 0.8 15.8 1.8 – 0.3 2.1 Edgar Ernst 30.0 – 3.8 33.8 30.0 – 3.5 33.5 Annette Harms 15.0 – 1.0 16.0 15.0 – 1.3 16.3 Tessen von Heydebreck 14.9 – 2.0 16.9 – – – – Peter Hoch 32.3 – 3.0 35.3 37.5 – 3.5 41.0 Elmar Kallfelz 27.0 – 2.5 29.5 25.1 – 3.0 28.1 Ralf Krüger 28.6 – 2.5 31.1 37.5 – 3.5 41.0 Axel Nawrath – – – – 4.9 – – 4.9 Hans-Dieter Petram 22.5 – 1.3 23.8 19.9 – 1.3 21.2 Bernd Pfaffenbach 4.6 – 0.0 4.6 15.0 – 1.3 16.3 Lawrence A. Rosen 4.6 – 0.5 5.1 – – – – Klaus Schlede – – – – 7.9 – 0.8 8.7 Elmo von Schorlemer 4.6 – 0.3 4.9 15.0 – 1.3 16.3 Torsten Schulte 26.8 – 2.3 29.1 27.4 – 2.0 29.4 Eric Stadler 16.6 – 1.5 18.1 15.0 – 1.3 16.3 Werner Steinmüller 24.5 – 2.8 27.3 0.0 – – – Gerd Tausendfreund 22.5 – 3.0 25.5 22.5 – 2.5 25.0 Renate Treis 24.1 – 1.5 25.6 22.5 – 2.5 25.0 Klaus Zumwinkel – – – – 7.0 – – 7.0

Total 496.1 – 40.2 536.3 485.4 – 40.8 526.2 1 The variable remuneration component includes long-term and short-term remuneration paid to Supervisory Board members for the relevant fiscal year.

36 Postbank Group I Annual Corporate Governance Statement

Peter Hoch received remuneration of €24 thousand for his work on the Supervisory Board of the BHW Group. For our Shareholders No further payments or benefits were granted to members of the Supervisory Board in return for services pro- An unsere Investoren vided individually in addition to members’ Supervisory Board activities, especially consulting and arrangement services. This does not apply to the remuneration of employee representatives as set out in their respective employment contracts.

Shareholdings of the members of the Management Board and Supervisory Board In fiscal year 2009, the aggregate shareholdings of all members of the Management Board and Supervisory Board amounted to less than 1 % of the shares issued by the Company. Our Business Divisions As of the balance sheet date, loans of €950.4 thousand (previous year: €70.4 thousand) had been granted to Unsere Geschäftsfelder members of the Management Board and members of the Supervisory Board. In fiscal year 2009, no loans had been granted as of the balance sheet date to Management Board members who left the Company in the course of the year. No other contingent liabilities were entered into.

D&O insurance The members of the Management Board and of the Supervisory Board are covered by D&O insurance in line with international standards. In accordance with the requirements of the Corporate Governance Code, the Our Responsibility Our Responsibility Our Responsibility Our Responsibility individual Management Board and Supervisory Board members are required to pay a deductible if a claim is brought. The deductible amounts were changed in line with the requirements of Section 93 AktG and section 3.8 of the German Corporate Governance Code effective January 1, 2010. Group Management Report Consolidated Financial Statements Other Information

37 Employees: Workforce successfully implements corporate strategy

Successful HR work lies in the details where all the different threads are tightly interwoven. This concept applies to both personnel strategy and the principles of its implementation as well as to the work with each individual employee. The Resources/Lending division at Postbank oversees company-wide human resources planning and management, the training and professional development of employees and managers as well as all matters related to a person’s employment.

I Workforce declines slightly At the end of 2009, the Postbank Group employed 20,857 full-time equivalents. This figure includes around 200 full-time equivalents who were brought on board in 2009 during the consolidation of BCB Processing GmbH and the integration of two subsidiaries who have not yet been consolidated, BHW Direkt GmbH and PB easytrade GmbH, into PB Direkt GmbH, the new call center subsidiary The number of employees declined by around 470 full-time equivalents at the end of 2009, compared with the remaining month of fiscal year 2008. We also employ about 7,019 civil servants, who make up about 33 % of employees, and roughly one-quarter of our employees work part time.

Staff costs rose only moderately year-on-year – despite the increase in payments to the Pensionssicherungsverein (the Pension Insurance Association), the wage increases that took effect on January 1, 2009, at PB Filialvertrieb AG and at Deutsche Postbank AG as well as several subsidiaries, and the provisions made for restructuring measures. 52 You will find details about these matters in the Management Report of this Annual Report (see p. 52).

For a number of years now, the staff-turnover rate in the Postbank Group has been very modest. In the year under review it was 3.7%. The average length of a person’s employment at the company was approximately 22 years in 2009. These figures represent how strongly employees identify with the company and how attractive the Postbank Group is as an employer. The latter is also demonstrated by a special distinction received in 2009. For the second consecutive year, Deutsche Postbank AG received the exclusive seal “Top Employer” from the independent market research company CRF. The Bank ranks eleventh among all participating companies and remains one of Germany’s most attractive employers.

I HR development: Training programs in Retail Banking remain the focus At Postbank, human resources development focuses on the particular demands of retail banking, which among other things is characterized by the heavy flow of customer traffic at our branches. Here Postbank calls upon its subsidiary PB Vertriebsakademie GmbH as a one-stop provider of all training programs at the Postbank Group. All of the Group’s sales channels can take advantage of its management and specialty courses as well as its sales-related skills training to be applied to interaction with customers. In addition to classroom-based courses, the Bank also utilizes decentralized forms of training like e-learning tools and “on-the-job training” to obtain the maximum benefit at an increased level of cost efficiency. Approximately 42 % of all training courses are now done through these latter measures.

38 Postbank Group I Employees

I Vocational training as a career springboard in the Postbank Group An important component of HR management is the training of young people. In 2009, Postbank offered 354 For our Shareholders new training positions across Germany (previous year: 354) and employed a total of 864 junior staff members An unsere Investoren as of December 31, 2009 (previous year: 842). In 2010, we intend to maintain the level of training positions that we offered during the previous year in spite of the overall reduction in the workforce. This is a critical contribution toward ensuring the future of the company, since Postbank meets a significant share of its personnel needs with its own junior staff. In 2009, as in previous years, about 90 % of all trainees who successfully completed their training received a job offer.

I Outlook

Postbank continuously works to increase customer service satisfaction and the efficiency of its processes. In Our Business Divisions Unsere Geschäftsfelder doing so, it becomes more cost efficient. As part of the strategic program announced in November 2009, the Bank will be able to adjust its personnel needs through the end of 2012 to 19,000 full-time equivalents. Here, Postbank will take advantage of normal turnover and employees’ willingness to change positions within the Group. This will enable the planned measures to be carried out in a socially acceptable manner. In a related action, the “Sidestep” program was initiated in 2009, giving interested employees who work in the back office or administrative positions the opportunity to gain additional qualifications and work in one of the 852 Postbank Finance Centers. A limited number of severance-pay and early-retirement packages will be offered as well. Our Responsibility Our Responsibility Our Responsibility Our Responsibility

Employees Dec. 31, 2009 Dec. 31, 2008

Number of employees (full-time equivalents) 20,857 21,127 Part-time employees 5,507 5,422 Percentage of female FTEs 58 % 58 % Percentage of male FTEs 42 % 42 % Percentage of civil servants 33 % 34 % Group Management Report Consolidated Financial Statements Other Information

39 Sustainability: Assuming social responsibility through sustainable action

Corporate sustainability is steadily gaining in significance in public discussions, and the financial crisis has given further impetus to this process. In 2006, Postbank made a public commitment to the guiding principle of sustainable development: Our efforts are focused on assuming our responsibility for the environment and society.

I A sustainable commitment in a global context To keep track of the latest ideas and trends in the area of sustainability, Postbank promotes dialogue that delves deeply into the issues of responsibility and environmental and climate protection. One forum for this dialogue is the Verein für Umweltmanagement in Banken, Sparkassen und Versicherungen e.V. (VfU – the Association for Environmental Management in Banks, Savings Banks, and Insurance Companies), an organization that we joined in 2005. In November 2008, we also became a member of the “FinanzForum: Klimawandel” (Climate Change Financial Forum), an advisory council of the German Federal Ministry of Education and Research. Through its former majority shareholder, Deutsche Post DHL, Postbank was also committed to the UN Global Compact from mid-2006 to the end of 2008. In January 2009, we signed our own pledge to the compact.

Postbank has integrated an environmental management system internally that is based on four pillars:

I Environmental guidelines I Environmental organization I Environmental handbook I Environmental program

Thus, for example, the environmental guidelines are a collection of principles and associated responsibilities for dealing with environmental issues and questions at Postbank. The goal is to anchor the environmental guidelines in our dominant culture and our company policies. As part of our environmental program, we have set our selves the goal of reducing by 2012 the carbon emissions from our business operations by 20 % compared with 2007. We intend to achieve this aim through such measures as using 100 % green electricity at our major locations, and have already implemented this particular measure as extensively as possible.

Assuming social responsibility, however, means much more to us than this. In one reflection of our commitment, we have held collection and fund-raising drives for charitable projects sponsored by Deutsche Welthungerhilfe (German World Hunger Assistance). Our employees have donated more than €335,000 to these initiatives. To promote education, we have long-running partnerships with several secondary schools at our sites in Bonn and Hameln. Since 2004, we also have been presenting the “Postbank Finance Award,” which bestows €80,000 in prize money annually and is thus the largest university award in Germany. In the company, too, we have given the issue of sustainability the priority that it deserves. In Postbank’s Code of Conduct sustainability is explicitly anchored in our corporate values as a cornerstone of our corporate culture.

In the area of sustainability, Postbank has moved forward in recent years and assumed a position among the leading banks in Europe. This is reflected by our position in sustainability rankings and in our inclusion in globally oriented stock indices. I Transparency in environmental and climate protection During the year under review, we successfully pressed ahead with our environmental and climate protection activities. After we laid the necessary foundation in 2008, Postbank’s environmental management system received ISO 14001 certification from TÜV Rheinland in the spring of 2009. We are pleased to have gained this certification because it serves as further evidence of Postbank’s environmental consciousness and focus on the future – also in terms of communications with investors, business partners and rating agencies. We also served as a partner for the week-long campaign called “Klima und Finanzen” (Climate and Finances) sponsored by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety that was held in January 2010.

40 Postbank Group I Sustainability

I Sustainability-focused bank products and services Postbank’s broad range of offerings includes a series of products designed particularly for customers who consider For our Shareholders environmental consciousness to be a critical factor in their decision making: An unsere Investoren

I The “Postbank Dynamik Vision” investment fund established in 2001 invests in companies listed in the Dow Jones World Sustainability Index and the DJ Euro Sustainability Index. It is one of Germany’s largest sustainability funds. I The closed capital-guaranteed investment fund “Postbank Dynamik Klima Garant” invests in companies that develop technologies that are designed to prevent or reduce climate change and themselves actively engage in climate protection. I With its “BHW Öko Konstant 10,” the Postbank subsidiary BHW offers its customers a financial incentive to employ energy-conserving technology when building new homes. Our Business Divisions

I As part of a “best select” approach, the Postbank Group brokers various promotional offers for the Kredit- Unsere Geschäftsfelder anstalt für Wiederaufbau (KfW). In this role, we are one of KfW’s largest cooperation partners, and our share of KfW new business in the area of living/energy is around 7 %. I In Postbank Finance Centers, we have been offering our customers since 2003 – at that time still as Deutsche Post retail outlets – the opportunity to obtain electricity from our cooperation partner LichtBlick, a company that produces its power from renewable energy sources. In February 2009, we also began to offer the environmentally friendly gas products sold by LichtBlick. I Since August 2009, we have been selling energy-efficient LED lights to customers in the larger Postbank Finance Our Responsibility Our Responsibility Centers to go along with energy-saving lighting. Our Responsibility I In our Postbank Finance Centers, we also sell environmentally friendly stationery (Blauer Engel, FSC, PEFC) and DHL’s climate-neutral services. I Sustainability reporting Since 2006, we have been reporting on our activities in and commitment to sustainability on a central platform, www.postbank.com/sustainability. This platform is broken down into current information, strategy and management, customers, employees and society. The Sustainability Report is available here as well. I Outlook Postbank’s goal for 2010 is to continue to enhance its environmental management system. In this context, we Group Management Report will once again request to be audited under DIN ISO 14001. We also intend to intensify sustainable activities within our sphere of influence and to strengthen our commitment to society.

Indices Listed since FTSE4good Indices Europe & Global March 2006 Ethical Index €uro January 2007 ASPI Eurozone (Advanced Sustainable Performance Index) December 2007 Consolidated Financial Statements ESI Pioneer Global Index (Ethibel Social Index) April 2008 Sustainable Anlageuniversum Bank Sarasin (Switzerland) October 2008

Ratings Ranking result Corporate Sustainability Rating (2009) 12th place among the industry‘s 79 business banks

Sustainable Asset Management (2008) Above industry average Other Information Scoris DAX-30-Rating (2007) 18th place (best DAX security to be listed for the first time in 2006) Vigeo (2007) Above industry average

March I 2010

Postbank Journal

I Focal point In the wake of the financial crisis

I Point of sale Comfortable branches

I Corporate Banking Partner to SMEs Contents

Focal point: In the wake of the financial crisis 04 Interview: Compelling products 06 Point of sale: Comfortable branches 08 Mobile advising: Customer proximity – literally 10 Service: New points for cash withdrawal 12 Payment transactions: An established pioneer 13 Corporate Banking: Partner to SMEs 14 Report: Balancing family and career 16 Sponsoring: Borussia Mönchengladbach 18 Editorial

Ladies and Gentlemen,

During preparation of the annual report, a colleague posed the following question: Do we really give our shareholders the chance to get to know us better in the sense of becoming personally acquainted? The idea became a spark of inspiration. After all, one thing is clear. Postbank, like every other corporation, does much more than its management report and financial figures alone tell.

What is our standpoint, for example, on topics that profoundly affect the financial sector? What is the reasoning behind certain strategic decisions? What is important to us as partners of our customers and as an employer? In the regular annual report, questions such as these can only be answered in a brief, matter- of-fact format. The idea for this supplementary journal was thus born. We hope it will leave you with a more colorful, more personal impression of Postbank.

I wish you pleasant reading.

Sincerely,

Stefan Jütte Chairman of the Management Board Underlying conditions for the economy and investors have changed in the wake of the financial crisis

Marco Bargel, down approximately $450 billion annually in com- Chief Economist parison to the boom years of 2003 to 2006. It is an at Postbank illusion to believe that stronger domestic orientation among the Asian drivers of growth can quickly com- In the wake of the turmoil caused by the financial pensate for this decline in demand. China is currently crisis, a number of markets have begun making a clear responsible for just four percent of global consump- recovery in 2009. These include in particular the stock tion. Even if Chinese consumption were to grow markets, which were largely able to compensate for another ten percent, that would equal just one percent their previous losses over the course of the year. The of U.S. consumption. Debt reduction plays a key role price of fixed-income securities, in particular of corpo- in determining how long U.S. households must rate bonds and bonds from euro zone countries and decrease their consumption in order to restore global emerging economies, also rose sharply in 2009. balance. This is a very lengthy process that usually takes several years. With the United States no longer Even though normality seems to have returned in many serving as a pacesetter for consumption, global growth areas, the underlying conditions for the economy and rates will be significantly lower in the coming years. capital markets have been lastingly changed by the Increases of five percent, such as those seen in the pre- financial crisis and its real economic consequences – crisis years, will remain a thing of the past for the time and in particular by the changes in economic policy being. Global growth rates of three to four percent are instituted in response to the crisis. more probable in the next five years.

Corporate profits are increasing Lower earnings opportunities for financial at a slower rate institutions in the short term

The crisis was triggered by a global imbalance caused The earnings potential of banks in particular could last- by the United States’ role as a worldwide driver of ingly decrease as a result of the crisis. On one hand, consumption. Its consumption was financed by other financial institutions will be struggling with negative countries, some of which generated enormous foreign effects on the asset side for some time to come. trade surpluses with the United States. This imbalance Defaults and losses in conjunction with structured can only be corrected through debt reduction and the products have for the most part been absorbed, but sustained lower consumption rates by U.S. households the real economic consequences of the crisis have yet that this requires. The flip side of the coin would be to be reflected in banks’ balance sheets. The number a return to global growth, as the United States is of corporate insolvencies in 2010 will continue to responsible for approximately one-third of all con- grow as a delayed effect of the recession, while the sumption worldwide. U.S. consumption is currently financial situation in private households will further

4 Postbank Journal Focal point

deteriorate. This may be accompanied by an increasing profitability of financial institutions. Ultimately, a simple number of defaults on loans. law of economics comes into play here: the more restricted the ability to take risks, the lower the chance On the other hand, additional burdens for the financial of earnings. That may mean, however, that earnings sector can also be expected in the form of economic also display a higher degree of stability. The crisis will policy. At the summit in Pittsburgh in late September also force the German banking sector to become more 2009, the heads of the G20 countries agreed on far- efficient. The recent past has already seen isolated reaching measures to prevent financial crises in the mergers of banks and even in a sector that to date has future. Banks are to be made more resistant to crisis been very rigid – public sector banks – there are signs through tougher requirements regarding the quality of movement. The potential for synergies of such and quantity of their equity. As a result, the need for mergers on the sales side are considerable and can equity will increase, likely having an impact on the strengthen the earnings power of banks in the long run.

Postbank Journal 5 The product is the hero Postbank’s path to its customers

An interview with Michael Meyer portfolio management. In the areas of insurance and Management Board Member for funds, however, we turn to strong partners such as Retail Banking HUK Coburg, Talanx and DWS – all of them leaders in their markets. Mr. Meyer, Postbank has become Germany’s number one retail bank. What are the product policies behind What benefits do these cooperative partnerships offer? this success? Our model is so attractive because it benefits everyone Our product portfolio is based on a combination of involved, above all our customers. We want to provide products we developed ourselves and products from them with the best products and solutions from all the well-known cooperation partners. Our proprietary different product areas – and our cooperative partner- products focus on the fields in which we have exten- ships enable us to do just that. Postbank concentrates sive experience and large market shares: checking on its core competencies, the fields in which we offer accounts, savings products, mortgage lending and top services, and selects partners who are outstanding home savings in particular. The whole value-added in their respective areas of specialty for all other finan- chain is in our hands here, from market research cial needs. As a result, we benefit from both the through product design and pricing all the way to expertise and prominence of these external brands.

6 Postbank Journal Interview

Will the new alignment introduced through the accounts and offering our checking customers prod- “Postbank4Future” program change this cooperative uct combinations that will enable them to benefit model in any way? from extra services.

No, at the core nothing will change. The new strategy What kind of service can customers expect from focuses on other aspects. It’s like this: in the mid-term Postbank? future, the retail market in Germany is expected grow by two to three percent per year. If we want our mar- We intend to further increase the strengths of our ket share to continue expanding in the future, we have broad multi-channel structure. That’s why we are going to understand our customers better than the competi- to further fine-tune the role distribution in sales. tion and act accordingly. Ever since the start of the The branches will be responsible for our core prod- economic crisis, retail customers in particular have ucts, while mobile sales will once again place greater been looking for a financial partner who can shed focus on its traditional strengths – mortgage lending, light in the darkness of the financial jungle for them. home savings, investments and retirement planning. That is expressly what we have committed ourselves to As direct banking channels, call centers and the doing through the “Postbank4Future” program. Internet will support the other sales channels with a wide range of products. By the way, our website is a Which means …? special source of pride for us. Customers have called it inno- This means that we will be ”Simple, comprehensible vative and easy to use, and it simplifying our product line and cost-effective – was awarded the “Innovation and offering more service. At Prize for Customer Orientation the same time, we must also that‘s what our products on the Internet” at the Euro lower administration and proc- Finance Week 2009 confer- ess costs in order to remain need to be.“ ence in Frankfurt. Here as well, price leaders and to satisfy our we are continually striving to shareholders’ profit expectations. remain the yardstick by which the competition must measure itself. That was an important catchphrase. What does “simplifying the product line” mean? A customer-friendly website is one thing – but what about on-site service? Catchphrase: white spaces on We want to make financial choices as easy as possible the cash withdrawal map … for our customers. That’s why we will soon be offering fewer variations of the assorted product types. That You are right. The issue of cash withdrawal is one of will make it easier to understand our offers without the most frequent complaints voiced by our custom- seriously reducing individuality, as confirmed by the ers. That is why we are taking new, innovative paths members of our customer advisory council. Their feed- here. In 2009, we launched cooperative partnerships back is very important to us and indicates that we are with Shell and OBI. Naturally these are just the first of moving in the right direction with our product range. many strategic partnerships that will enable us to provide Simple, comprehensible and cost-effective – that’s customers with more points for cash withdrawal. what our products need to be. We are therefore cur- Together with the other improvements in products rently once again reviewing our entire product range and service, we are thus creating excellent conditions for for improvement potential. As a first result of this making Postbank an even more attractive banking part review, we will be adjusting the prices of our checking ner. That should be evident in our future results as well.

Postbank Journal 7 Branches in change

A clearly structured and well-organized custom- Glass elements that dampen sound while admitting er area, comfortable lounges with coffee ample light, as well as a closable door, ensure the machines and children’s corners to ensure a necessary discretion for such talks. At the customer pleasant wait for an appointment with an advis- advisers’ desks, a rotating monitor enables customers er, even a branch TV to deliver information on to share a view of the online advising system offering our products and supply the latest news – the a wide range of sales support applications, from pro new Postbank Finance Centers. Postbank has duct information all the way to the forms needed for already redesigned twenty-eight of them concluding a business deal. throughout Germany in keeping with the new concept that was declared the winner of the A pleasant stay “Best Branch Office 2009” contest sponsored by the German financial trade journal “Geldinstitute”. In order to provide customers with even better service, Approximately twenty more branches will be Postbank has also installed new service points. These renovated in 2010. serve as additional contact points for customers

With the new design concept, Postbank wants to place greater focus on bank services without neglect- ing products from Deutsche Post and other partners. Postbank is thus catering to its customers’ desire for more service, clearer orientation, more streamlined processes and contemporary design. Visually pleasing functionality has priority over trendy architecture; individual structural details are based on the size, layout and surroundings of the respective branches.

Reaching goals faster

To help customers handle their banking business even faster and avoid long waits, Postbank will be organizing its counters into Deutsche Post, DHL and Postbank service areas in the future. In the most recently renovated branches, for example, the service counters are color coded. Banking customers are asked to use the blue lane and postal customers the yellow lane. This reduces waiting times for both groups of customers, although all services are naturally still available at all counters. Branches with a large number of parcel pick- ups have also been equipped with their own DHL counter.

Advising zones provide privacy for customer talks

Asset building, retirement planning, lending, invest ment – separate advising zones are available for in-depth discussions during individual appointments.

8 Postbank Journal Point of sale

looking for advice, a brief advising session or to make an appointment. Other amenities in the new Postbank Finance Centers include seating groups with coffee machines and water dispensers as well as play areas Customer talks in modern advising zones for children.

Surveys indicate that customers and employees are very pleased with the furnishings and atmosphere of the newly renovated branches. The self-service zones alone have clearly boosted the image of the Financial Centers as banking branches.

Self-service zones for financial and postal services

Postbank Journal 9 Financial solutions for the entire family

Klaus and Martina Schneider have fulfilled their responding to the challenges, needs and life cycles of life-long dream: In October, the couple and their our customers at any time,” said Hanno Schädel, two children moved into their own home located Chairman of Postbank Finanzberatung. “The experts in a lush natural setting. “We had some great in all three areas work hand-in-hand and find just the support on the journey. The BHW real estate right financial concept for their customers.” adviser not only helped us find the right house, but also put us in touch with a financial advisor This is a demanding job that requires sensitivity as well at Postbank who created exactly the right financ- as subject-matter expertise. Niels Brügmann, an investing package for us.” ment adviser at Postbank, is one of the approximately 4,000 mobile advisers. “I really enjoy coming to Karl Ballrup, Martina Schneider’s father, had recom- understand people’s needs and developing the right mended Postbank Finanzberatung. “I’ve been a investment strategy,” Brügmann said. He also knows Postbank customer for decades – and I’ve been that customer trust depends just as much on the qual- involved in every type of financial matter,” the 72-year- ity of his advice as on the quality of the products old said. “And I have to say, I’ve always had a good that are recommended. “The standard to which we experience. Regardless of the investment and retire- feel committed has proven itself particularly during the ment matter I had on my mind – my investment financial crisis: providing objective advice as well as adviser always came up with a good solution.” Karl offering a variety of first-class financial, insurance and Ballrup and the Schneiders were especially happy that pension-provision products at fair conditions.” they could meet their adviser in the place where they feel most comfortable: at home. Martina Schneider Understanding customers said, “Because Klaus and I work during the day, this is is the key to success ideal for us. We are undisturbed at home during the evening and have the time we need.” “Skilled advising tailored specifically to people and their needs is also the key to success in financial man- Everything from a single source agement,” said Beate Neff, sales director in the Black Forest city of Waldkirch and a contact person for mat- For customers like the Ballrups and the Schneiders, ters concerning finances and pension provision. “It’s Postbank Finanzberatung, acting as Postbank’s mobile the only way to establish long-term customer relation- sales operation, conducts around two million advisory ships.” This also means taking the time needed for meetings in customers’ homes or in one of its more complex processes like mortgage lending. That’s why than 900 advisory centers each year, offering tailored meetings with customers are frequently held in the financing concepts from a single source. “With our evening or on weekends, often right in the customers’ three sales branches of financial management, invest- home. “I’m happy when my customers are satisfied ment advising and real estate, we are capable of and feel that they are in good hands,” Neff explained.

10 Postbank Journal Mobile advising

Michael Binder feels the same way about his work as Satisfaction is shaped through Regional Director of BHW Immobilien in Bad Salzuflen. personal contact More than 300 qualified agents working in more than 200 real estate centers across Germany assist their A personal commitment teamed with reliability and customers with the purchase or sale of apartments, far-reaching expertise – this has a big impact in the lots and houses – for their own use or as a capital market. Not only have the Schneiders and Karl Ballrup investment – and broker vacation property in the most reached this conclusion, but so have market researchers beautiful vacation regions of Germany. “Our agents in studies conducted by independent third parties. The offer a complete range of services, from the initial customers of Postbank Finanzberatung express a high viewing of the property to the final notary-public con- degree of satisfaction. This positive perception under- tract. One unique feature of this work is the partnership scores the important role that mobile sales play as a with financial managers. As a result, customers have personal contact partner within the multichannel bank easy, direct access to a financing expert,” said Binder, strategy of Postbank. and he is convinced. “The integrated personal support is one of the main reasons why customers select us.”

Postbank Journal 11 Service

Cash withdrawal made even easier

How does Integrated Cash Management (ICM) work?

Day by day, Postbank is working to become an even For customers, Integrated Cash Management more attractive partner for its customers – with easy- (ICM) works like an automated teller machine. to-understand products and good conditions, exem- Customers enter their PIN as usual into a card plary service, as well as access channels and support reader, in this case at a service station cash options whose variety and frequency are unparalleled register. In contrast to the usual procedure, how- on the German market. ever, the cash is then dispensed to the Shell employee, who passes it on to the Postbank One important step in this direction, the availability of customer. This system provides security benefits, cash withdrawal points nationwide, was successfully since Shell service stations are well-lit and full of taken in the form of a cooperative agreement with customers even after most other stores have Shell. Our existing 7,000 CashGroup automated teller closed. Moreover, only Shell employees come machines, 852 Postbank Finance Centers and several into contact with the cash dispensing devices, thousand Deutsche Post retail outlets have now been thereby virtually excluding technical manipulation. joined by cash stations at 1,300 Shell service stations. This cooperation has helped us to fill some remaining white spaces on our cash withdrawal map.

The new cash stations offer an impressive array of advantages: they are very conveniently located for drivers, offer ample parking, are easy to recognize via the Shell brand and are well secured at all times. In addition, Postbank customers can save time by com- Banking. “There are advantages for both retailers and bining two everyday necessities – filling up the car and companies. They especially appreciate the personal withdrawing cash. As a special bonus, current account customer service in our Business Customers segment, and SparCard savings account customers receive a which is the reliable partner for over 260,000 small discount of one cent per liter of fuel, even when they companies, self-employed individuals, freelancers and don‘t withdraw cash. manufacturers.” Another cooperative partnership has already been successfully initiated with OBI, Germany’s “In light of the many benefits for our customers, we largest building supply store chain. After cash dispens- are reviewing whether the cooperation concept could ing machines have been installed at 180 OBI stores, also be implemented with retail firms and other com- the do-it-yourselfers and gardening buffs among our panies located at traffic hubs,” said Michael Meyer, customers will be able to shop and withdraw cash at Management Board Member responsible for Retail the same time in 159 cities.

12 Postbank Journal Payment Transactions

Postbank is a pioneer in payment transactions

Whether in our role as a partner to bank customers or Quality, security and speed are the hallmarks of more as a service provider for other financial institutions, than just the services we provide for our bank custom Postbank is the technology leader in payment transac- ers, however. We bring our quality standards to bear tion processing. in the processing of payment transaction for third- party banks as well. Our subsidiary BCB AG handles an Our multi-award-winning online banking system, for average of 30 million transactions per day. The volume example, has enabled real-time transfer of funds to of funds moved is impressive: some €120 billion daily. other Postbank accounts since 2004. Just a few years Here, we offer our client banks individual solutions ago, we pioneered development of the mobile TAN ranging from selected individual modules all the way procedure now used by many of our competitors. to full-service packages. Thanks to industrial process- Currently, Postbank is involved in the development of ing based on a modern, multiclient enabled new, even more secure TAN procedures. We were the IT platform and highly standardized processes, we first bank to introduce its own user interface for satisfy our clients with efficient, competent and reliable iPhone banking, and are the leader in the further evo- solutions for payment transactions, account services lution of mobile and Internet-based banking services and document management. that make our customers’ lives even easier.

Postbank Journal 13 Postbank, the partner of German SMEs

Small and medium-sized enterprises (SMEs) are of sectors were left untouched by the severe economic the backbone of the German economy. These slump. SMEs, large numbers of which also operate businesses require reliable financial service pro- successfully on international markets, were hard hit viders, in particular in times of crisis. Postbank by the global financial and economic crisis. Such enter- offers corporate customers exactly what they prises are and will remain the backbone of the German need for their day-to-day business activities. economy. As drivers of innovation and jobs, they create over seventy percent of the country’s jobs. The majority The year 2009 left deep marks everywhere, including of the German population make their living from or the balance sheets of German companies. Only a handful through SMEs.

14 Postbank Journal Corporate Banking

attention to the syndicated and structured financing options, which are becoming increasingly significant among SMEs as well.

Postbank‘s partnership with SMEs goes far beyond just securing liquidity, however. “We offer companies exactly the financial services they need for their day-today business – custom tailored, comprehensible and always at conditions in line with the market,” Roos went on to say. One area of focus is payment transactions. In 2009, Postbank launched the web-based International Cash Management system, an innovative solution that satisfies all the requirements of internationally operating SMEs. The service offer is rounded off by a wide variety of investment products that are in line with market requirements as well as by all of the modern options in the areas of interest rate hedging and currency management. “Here as well, we have Supporting SMEs in their work is one of Postbank’s purposefully aligned ourselves to the special needs of main tasks. “In particular, this includes supplying these SMEs,” said Roos. companies with liquidity,” said Harald Roos, Manage- ment Board Member of PB Firmenkunden AG. In the However, it is the corporate customer advisers who recent past, Postbank has proven this claim with an truly bring this special partnership with SMEs to life. SME campaign in the lending sector as well as targeted Companies place utmost trust in them as competent expansion of promotional loan offers. “We offer SMEs financial service brokers. “Our employees are well- a wide range of financing opportunities for any time versed in the business of the corporate customers,” span,” said Roos. In this context, he drew special Roos said. “Reliability is an exclusively human factor.”

Postbank Journal 15 A well-organized, family-oriented company

Charlotte (6), Nele (9) and Melia (4) share one thing and foremost as a source of support in emergencies. in common: their mothers work for the Postbank “When the kindergarten and school in Hamelin were Group. Maike Pannewitz and Angela Eckert one closed because of a bomb scare, the Familienservice day found themselves confronted with the ques- program immediately arranged supervision for my tion of family or career. These two ladies chose both. daughters,” said BHW employee Maike Pannewitz. She also has words of praise for the vacation childcare “The compatibility of children and career depends to a program for children of Postbank employees. great extent on the company one works for, and in particular one’s direct supervisors and colleagues,” say These two Group-wide programs are augmented by all parents. parental assistance services that differ according to location. BHW in Hamelin and Postbank in Bonn, for At Postbank, employees can always turn to Familien example, cooperate with directly adjacent daycare service, the family services program of the Group, first facilities for children under the age of three.

16 Postbank Journal Report

When all else fails her working time to eighty percent after her parental leave, she finishes work at three o’clock in the after- Yet no matter how tightly knit a network of nurseries noon – on the dot because she has to pick up her and kindergartens, nannies and grandparents one may daughter from kindergarten. “It works well,” she said. weave – the moment of catastrophe will inevitably Angela Eckert has to be flexible during peak workload arrive. Work is piling up just as the kindergarten calls times, “but that is seldom.” In exchange, she can be to say that the little one has developed a high fever sure that her colleagues and supervisor don’t mind her and needs to be picked up right away. Nannies and leaving right away at quitting time. Angela Eckert’s grandparents can’t be reached. At such moments, the supervisor, for example, took her place in a full-day only hope now is that colleagues and supervisors will workshop in Frankfurt “without me even having to understand. It is crucial that working parents don’t feel think about it.” like others will look at them askance when they must leave quickly in cases of family emergency or if they Parents need the certainty of knowing that they can be seldom stay late at work. there for their children without having a guilty conscience. Postbank seems to have created just Angela Eckert, responsible for corporate design at such a corporate atmosphere. Postbank in Bonn, confirms this. Ever since reducing

Slightly reduced working hours give Angela Eckert and her daughter Melia time to play.

Balancing children and career is usually no problem for Maike Pannewitz – here with her daughters Charlotte and Nele.

Postbank Journal 17 Twelfth player joins the eleven “colts” from the Lower Rhine

Postbank and soccer – these are two things that Postbank sought to sponsor a popular figure or group belong together. After four years as a premium that would appeal to a large number of fans and not partner of the German Football Association have a polarizing effect, such as a well-managed, (Deutscher Fußball Bund) and the German nation- traditional club that has done successful charity work al team, Postbank is returning to its sponsoring with young people. “The team from Mönchengladbach roots in Borussia Park. has proven itself sensible and solid for years now. In times of economic crisis, that is an important state- This is where Postbank celebrated the beginning of its ment in professional sports. We are happy to accom- World Cup soccer campaign in 2005, and set a world pany Borussia on this path,” said Stefan Jütte, record at the same time. Under the direction of Franz Chairman of the Management Board of Postbank. Beckenbauer and Oliver Bierhoff, a total of 142,000 Postbank soccer balls were lined up in the stadium – a spectacular event that heralded the advent of the Borussia’s president Rolf Königs views Postbank’s entry “2006 Summer Fairy Tale” soon to follow. onto the field as a milestone for his club as well. “We are extremely proud to have acquired a successful, Just in time for the start of the Bundesliga 2009 soccer large German corporation as our partner,” he said. league season, Postbank took to the field as the main “Postbank has redefined soccer sponsoring in the past, sponsor for Borussia Mönchengladbach. The agreement generating high awareness and appeal. We are delight- runs until 2011, with an option to extend until 2013, ed with this cooperative partnership.” and is valid for both the first and the second leagues.

“ We are extremely proud to have acquired a successful, large German corporation as our partner.”

Rolf Königs, President of Borussia Mönchengladbach

18 Postbank Journal Sponsoring

2 : 0 for the new team team logo in the world (covering an area of 100 m²) in front of the north end of Borussia Park. The diamond With both sides so enamored of each other, it comes is made from 10,000 fan photos that Postbank had as no surprise that the partnership has gotten off to a taken during the season’s opening celebration. “The good start by scoring two big points. First, in July of idea of creating a huge diamond-shaped team logo is 2009, Postbank began offering all Borussia fans a entirely new and builds a creative bridge to our fans in “Fohlen” account (the team is affectionately known as the best possible of ways,” said Stefan Jütte. “We the “Fohlen” or “colts” among its fans) – a checking were naturally very pleased to be a part of it.” account in combination with VISA card featuring the Borussia logo. As an additional highlight, customers In summary: The eleven “colts” have now acquired a receive an original Borussia home jersey as a free gift competent and reliable sponsor who will be there for when they open their account. them even in difficult economic times. In turn, Postbank has found a popular national representative with The second big point was scored when Postbank and which it can appeal to customers throughout Germany Borussia set another world record together. On via the topic of soccer. The partners will have the oppor November 7, they unveiled the largest diamond-shaped tunity to benefit from each other for at least two years.

Postbank Journal 19 partnerschaftlich

Gute Partnerschaften • www.postbank.de/ir gründen auf Fairness und • [email protected] Verlässlichkeit. Wir freuen • 0228 920-18003 • Postbank Investor Relations uns, in unseren Aktionären sehr gute Partner zu haben. Contents

Fiscal Year 2009 For our Shareholders An unsere Investoren

Group Management Report Consolidated Financial Other Information Our Business Divisions Statements Unsere Geschäftsfelder

44 Business and 95 Consolidated Statement 165 Consolidated Income Environment of Comprehensive Income Statement – Quarterly Overview 45 Disclosures in accordance 96 Consolidated Balance with section 289(4) and Sheet 166 Consolidated Income section 315(4) of the HGB Statement –

and explanatory report 97 Statement of Changes Multi-Year Overview Our Responsibility in Equity 46 Remuneration of the 167 Consolidated Balance Management Board and 98 Consolidated Cash Flow Sheet – the Supervisory Board Statement Multi-Year Overview

48 Employees 100 Notes 168 Segment Reporting – Multi-Year Overview 48 Macroeconomic 133 Segment Reporting environment in 2009 (Note 40) 170 International Financial Reporting Standards

164 Auditors‘ Report Group Management Report 50 Net Assets, Financial (IFRSs) Position, and Results of Operations 172 Executive Bodies

53 Segment Reporting 174 Group Structure

55 Total Assets 176 Glossary

56 Report on Post-Balance 182 Contact Details Sheet Date Events Consolidated Financial Statements 57 Risk Report

90 Report on Expected Developments

Other Information

43 Fiscal Year I Group Management Report I Business and Environment I Disclosures in accordance with section 289(4) and section 315(4) of the HGB and explanatory report

Key locations Deutsche Postbank AG The headquarters of Postbank is located in Bonn and – for parts of Group Management Report the Financial Markets division – in Frankfurt am Main. Postbank also maintains a network of 852 branches across Germany. The subsidiary BHW Bausparkasse AG is domiciled in Hameln. I Business and Environment In European regions outside Germany, Postbank is represented in its Organization and management of the Group retail banking business in Luxembourg and in Italy. Postbank conducts Business activities, important products, services private mortgage lending in the Indian market through a subsidiary. and business processes Deutsche Postbank AG (Postbank) provides financial services for retail In the divisions of Corporate Banking and Financial Markets, and corporate customers as well as other financial services providers Postbank is also represented by subsidiaries in Luxembourg and based primarily in Germany. The focus of its business activities is New York as well as by a branch in London. Retail Banking. Its work is rounded out by the business it conducts with corporate customers (payment transactions and financing), Fundamental sales markets and competitive position settlement services (Transaction Banking) as well as money market In Retail Banking, Postbank conducts its business almost exclusively and capital market activities. in Germany and is the largest single-entity institution when viewed in terms of the number of customer. Its major product fields are sav The Postbank Group has organized its activities into the divisions of ings, checking accounts and private mortgage lending as well as Retail Banking, Corporate Banking, Transaction Banking and Finan home savings. Postbank is among the leaders in Germany in each cial Markets: of these areas, based on balance-sheet volumes. Private retirement- provision solutions, personal loans and the securities business round I In the Retail Banking division, Postbank offers retail and corporate off the product range offered to retail customers. In these areas, customers standardized, reasonably priced banking and financial Postbank offers some products and services as part of partnerships service products designed to meet typical needs. The focal point to other banks and insurance companies. Postbank’s major com is placed on the traditional checking account and savings deposit petitors in the retail banking business in Germany are providers from business, home savings and mortgage lending products as well as the sector of savings banks and cooperative banks as well as major consumer loans. The product range is complemented by offerings banks. of securities (particularly funds) and insurance as well as retirement-provision schemes. As a multi-channel bank, Postbank offers In addition to Retail Banking, Postbank is involved in the Corporate its products in branches, through mobile sales, direct banking Banking business. As a mid-sized provider, we focus in this area in (Internet and mailings) and call centers as well as through the particular on German SMEs. Postbank is also currently the largest third-party sales of agents and cooperation partners. In a partner- provider of the insourcing of payment-transaction services. With four ship with Deutsche Post AG, Postbank offers postal services in its clients (including recently added HSH Nordbank) and more than 7 network of branches. This business increases the number of daily billion transactions per year, it has achieved a good competitive posi visitors to the branches and generates fee and commission income. tion in a market characterized by a comparatively small number of providers. I The Corporate Banking division provides Postbank’s corporate customers with services revolving around payment transactions Group management at Postbank and corporate loans, commercial real estate financing, and The management within the Postbank Group is based on an integrated factoring and leasing. Investment and capital market products and consistent system of key performance indicators that is uniform complement the product range. Group-wide. The system links targets, planning, operational manage I The Transaction Banking division is responsible for conducting ment, performance measurement and remuneration. The objective of payment transactions, managing accounts, processing loans and this management approach is to optimize profitability and efficiency. providing related services. Services associated with payment transactions are provided by the Betriebs-Center für Banken AG The central profitability target for the capital market-oriented (BCB), a wholly owned subsidiary, for both Postbank and outside management of the Postbank Group is the expectation of returns on financial institutions. Postbank provides services related to account equity in accordance with IFRSs, as measured by return on equity management and loan processing only on an internal basis. (RoE) before and/or after taxes.

I The Financial Markets division performs the Postbank Group’s This includes profit after tax, a parameter that allows reconciliation money market and capital market activities. Its responsibilities from profitability to efficiency. Through the use of the fundamental include hedging net interest margin contributions from the customer earnings components of total income and administrative expenses, business by controlling interest rate risks and market risks. The the cost income ratio (CIR) can be determined as the central bench Financial Markets division also manages the liquidity position of mark for income and productivity management, and, as a result, for the Postbank Group. The Financial Markets division also oversees efficiency. It measures the relation of administrative expenses to total the banking activities conducted in Luxembourg and by several income before allowance for losses on loans and advances. subsidiaries that oversee the administration and management of the Postbank brand’s retail funds and special funds.

44 Fiscal Year I Group Management Report I Business and Environment I Disclosures in accordance with section 289(4) and section 315(4) of the HGB and explanatory report

As the most critical parameter used to assess and manage earnings Equity interests in excess of 10 % power, total income includes in particular net interest income as the The Federal Republic of Germany holds an 80 % equity interest in key income indicator in the customer business. KfW Bankengruppe, which in turn holds an interest of around 30.5 % in Deutsche Post AG, which has an interest in Postbank of around On the segment level, Postbank directs its activities on the basis of a 39.5 %. In addition, Deutsche Bank AG notified us in writing on March 9, management-information system whose core component is manage 2009, that it holds a 25 % stake plus one share in Deutsche Postbank AG. ment accounting by business division. In general, management is conducted in a similar manner to the way it is performed on the Group The free float traded on the stock exchanges therefore amounts to For our Shareholders level, in which expectations for returns are measured on the basis around 35.5 % of Postbank’s share capital. According to the disclosures An unsere Investoren of RoE before taxes. The allocation of equity to the segments is based received by us in accordance with section 21 (1a) of the Wert on their risk capital requirements. papierhandelsgesetz (WpHG – German Securities Trading Act) as of December 31, 2009, the Company is not aware of any other share The previously mentioned income and expense figures serve as holders that directly or indirectly hold more than 10 % of the management parameters on the segment level. In the core business, share capital. the income drivers of volume, margins and risk as well as the contri bution margin are also taken into account in management. Powers of the Management Board to issue or repurchase shares On April 22, 2009, the Annual General Meeting of Postbank adopted For operational management, the strategic and operational targets the following resolutions: Our Business Divisions are further defined as key performance indicators (KPIs) on the basis Unsere Geschäftsfelder of balanced scorecards and subjected to regular reviews. This assures The Management Board is authorized, with the consent of the Supervisory that all business activities are focused on achieving company objec Board, to increase the Bank’s share capital on one or more occasions tives. by up to a total of €273,500,000 up to April 21, 2014, by issuing new, non-voting no-par value registered shares against cash and/or The variable remuneration of employees and executives in the non-cash contributions (including mixed non-cash contributions) Postbank Group is closely linked to this management system. It is (Authorized Capital). This authorization can be exercised in full or based on profit before tax and the CIR. As a result of new regulatory in part. Shareholders are generally granted pre-emptive subscription requirements for our executives and risk takers, a sustainability factor rights. The new shares may also be subscribed by a bank determined Our Responsibility Our Responsibility will be used to calculate a portion of the variable remuneration in by the Management Board or by a banking consortium stipulated by the future, the so-called earnings component (which makes up 30 % the Management Board and subject to the obligation that they then to 40 % of variable remuneration).The earnings component itself is be offered to shareholders for subscription (pre-emptive subscription rights). evaluated after the end of the fiscal year, withheld, and then evalu ated according to the sustainability factor in the following third year. Moreover, the Management Board is authorized to increase the Bank’s share capital contingently by up to €164,100,000 by issuing up At that time, where appropriate, it becomes due and is paid out. to 65,640,000 million new no-par value registered shares (Contingent This sustainability factor is based on the concept of economic value Capital 1). The contingent capital increase serves to issue shares to added and further anchors value-focused, sustainable thinking in the holders and/or creditors of convertible bonds and/or bonds with the incentive system at Postbank. warrants, participating bonds and/or profit participation certificates (or combinations of these instruments) and is only to be performed Group Management Report insofar as option rights and/or conversion rights are used and/or the I Disclosures in accordance with section 289(4) and conversion obligation is met. section 315(4) of the HGB and explanatory report The specific provisions governing Authorized Capital I and Contingent Share capital, voting rights, and transfer of shares Capital I are contained in our Articles of Association, which are avail Postbank’s share capital amounted to €547,000,000 as of December 31, able on our website. 2009 and is composed of 218,800,000 no-par value registered shares. Each share conveys the same statutory rights and obligations and On April 22, 2009, the Annual General Meeting of Postbank renewed grants the holder one vote at the Annual General Meeting. No share the Management Board’s global authorization to purchase own holder or group of shareholders is entitled to special rights, in par shares. Accordingly, the Management Board is authorized to purchase ticular those conveying powers of control. own shares up to a total of 10 % of the share capital. Consolidated Financial Statements

The exercise of voting rights and the transfer of shares are based on First, the Company is thus authorized to purchase and sell own the general statutory provisions and the Company’s Articles of shares for the purpose of securities trading in accordance with section Association, which do not limit either of the two. Article 17 determines 71(1) no. 7 of the Aktiengesetz (AktG - German Stock Corporation the requirements that must be met by shareholders to attend the Act) up to October 21, 2010. The holdings of shares to be purchased Annual General Meeting and exercise their voting rights. The Company for this purpose may not exceed 5 % of the Company’s share capital only regards as shareholders the persons entered as such in the at the end of any given day. In addition, shares purchased on the share register. The Management Board is not aware of any agree basis of this authorization together with other shares of the Company Other Information ments between shareholders that restrict voting rights or the transfer that the Company has already purchased and still holds may not of shares. account for more than 10 % of the share capital at any time.

45 Fiscal Year I Group Management Report I Remuneration of the Management Board and the Supervisory Board

Second, the Company is authorized in accordance with section 71 (1) of the votes cast, in the absence of binding legal requirements to the no. 8 of the AktG to purchase own shares amounting to up to a contrary. Where the law prescribes a capital majority in addition to total of 10 % of the share capital existing at the date the resolution a voting majority, votes are passed by a simple majority of the share is adopted, up to October 21, 2010. This figure includes shares that capital represented during the vote. the Company has already purchased and still holds. The Management Board may only utilize shares purchased on the basis of the authori Material agreements of the Company that take effect in the zation for purposes other than sale via the stock exchange or via an event of a change of control following a takeover bid offer to all shareholders if the purposes concerned are specified in Deutsche Postbank AG has entered into sales agreements with Talanx the authorization. The approval of the Supervisory Board is required Aktiengesellschaft and its subsidiaries PBV Lebensversicherung AG in each case. (formerly BHW Lebensversicherung AG), Postbank Versicherung Aktiengesellschaft, and PB Lebensversicherung Aktiengesellschaft. In the year under review the Bank made use of its authorization to These agreements cover the brokerage and sale of insurance prod purchase own shares to a small degree. A total of 12,292 shares with ucts from Talanx and its above-mentioned subsidiaries by Postbank a market value of €176,000 were acquired. The resale of these treasury via its branch-based and mobile sales, call center, as well as via shares led to a loss of €12,000. At the balance sheet date, Postbank Postbank’s Internet platform. PBV Lebensversicherung AG, Postbank did not hold any treasury shares. Versicherung Aktiengesellschaft, and PB Lebensversicherung Aktiengesellschaft are entitled to terminate these sales agreements The details are provided in the motions resolved by the Annual General giving six months’ notice if a third party that is not an affiliated Meeting on agenda items 6 and 7 of the Annual General Meeting on company of one of the parties to the agreement gains control of April 22, 2009, which are also available on the Company’s website. Deutsche Postbank AG (change of control), whereby such control may be acquired either directly by way of the direct acquisition of It is common practice among listed German stock corporations for control of Deutsche Postbank AG, or indirectly by way of the acquisi the Annual General Meeting to reissue the authorization to purchase tion of control of an entity that controls Deutsche Postbank AG either own shares every year. The Management Board and the Supervisory directly or indirectly. Should PBV Lebensversicherung AG, Postbank Board will propose to the Annual General Meeting on April 29, 2010, Versicherung Aktiengesellschaft, or PB Lebensversicherung that this authorization be renewed. Aktiengesellschaft terminate the sales agreements, this could endanger or impact the brokerage and/or sale of the sales partners’ insurance Appointment and dismissal of Management Board members products by Deutsche Postbank AG and the remuneration generated The members of the Company’s Management Board are appointed by this, which is of material importance for the Company’s business by the Supervisory Board for a maximum term of five years in accord operations. ance with section 84 of the AktG and section 31 of the Mitbestim mungsgesetz (MitbestG – German Codetermination Act). Members Compensation agreement in the case of a takeover bid may be reappointed or their term extended, in each case for a maximum No compensation agreements in the case of a takeover bid have of five years, insofar as this is permitted by the relevant statutory been concluded with current members of Postbank’s Management provisions. Under Article 5 of the Company’s Articles of Association, Board. the Management Board consists of at least two members. Otherwise, the Supervisory Board determines the number of members of the Management Board and can also appoint a Chairman of the Manage I Remuneration of the Management Board and ment Board and a Deputy Chairman of the Management Board, as the Supervisory Board well as alternate members. Structure of the remuneration of the Management Board in Under section 24(1) no. 1 and section 33(2) of the Kreditwesengesetz fiscal year 2009 (KWG – German Banking Act), the Bank must prove to the German The overall structure of the remuneration of the Management Board Federal Financial Supervisory Authority (Bundesanstalt für Finanz as well as significant contract components are stipulated by the dienstleistungsaufsicht – BaFin) and Deutsche Bundesbank before the Supervisory Board of Deutsche Postbank AG and regularly reviewed. intended appointment of members of the Management Board that the proposed members have sufficient theoretical and practical The Executive Committee of the Supervisory Board discusses the knowledge of the Bank’s business as well as managerial experience. appropriateness of the remuneration of the members of the Manage ment Board of Deutsche Postbank AG, taking into account the Amendments to the Articles of Association Company’s performance, the sector, and the prospects for the future. Postbank’s Articles of Association may be amended in accordance with the provisions of sections 119(1) no. 5 and 179 of the Aktien The level of remuneration for members of the Management Board is gesetz (German Stock Corporation Act). Under these provisions, determined on the basis of the size and activity of the Company, its amendments to the Articles of Association require a resolution by the economic and financial situation, and the tasks of the Board members Annual General Meeting. Under Article 19(3) of the Articles of in question. Remuneration is calculated so that it is appropriate and Association, the Supervisory Board is also permitted to make amend competitive in the national and international job market and there ments to the Articles of Association that relate exclusively to their fore offers an incentive for dedicated and successful work. The level wording. Under Article 19(2) of the Articles of Association, the reso of remuneration is linked to performance. lutions by the Annual General Meeting are passed by a simple majority

46 Fiscal Year I Group Management Report I Remuneration of the Management Board and the Supervisory Board

Overall remuneration consists of fixed components and a perform phase has ended and only if the relevant sustainability criterion to be ance-related component. established by the Supervisory Board has been met. If the sustainability criterion is positive or equal to or better than in the base year during The base pay (fixed components) and other compensation are not the sustainability phase, then the long-term component will be paid linked to performance. The base pay is paid as a monthly salary in in the fourth year after the base year. Otherwise, the payment is for twelve equal installments. feited without compensation. Remuneration of the Management Board is thus affected by negative developments in the Company The standard performance-related (variable) component consists of during the entire measurement period (malus system). For our Shareholders the annual bonus. An unsere Investoren Remuneration of the Supervisory Board The annual bonuses awarded to members of the Management Board The remuneration system is laid down in Article 15 of the Articles of are paid according to the achievement of quantitative and/or quali Association of Deutsche Postbank AG. In accordance with this article, tative targets. These targets form part of a target agreement the annual remuneration of members of the Supervisory Board con established at the start of each fiscal year. The size of the bonuses is sists of fixed and performance-related components, plus a performance- based on the degree to which predetermined target values are related component with a long-term incentive effect. This reflects the reached or exceeded. responsibilities and scope of activity of the Supervisory Board’s work and the economic performance of Deutsche Postbank AG. The positions The size of the bonus is capped on the basis of individual agree of chair and deputy chair as well as membership of a committee are Our Business Divisions ments. The maximum annual bonus is granted where the upper tar reflected in the remuneration. Unsere Geschäftsfelder get value specified for the fiscal year is reached. The variable remu neration component can exceed the fixed remuneration component. The remuneration of a full member of the Supervisory Board who is not a member of a committee is as follows: The fixed component The Supervisory Board has the right to award members of the amounts to €15,000, while the variable annual component amounts Management Board an appropriate special bonus for exceptional to €300 for each €0.03 by which the consolidated net profit per share performance. for the respective fiscal year exceeds the amount of €2.00. Members of the Supervisory Board will be entitled to performance-related New structure of the remuneration of the Management Board remuneration with a long-term incentive effect amounting to €300 Our Responsibility Our Responsibility In fiscal year 2009, the Supervisory Board intensively reviewed the for each 1 % by which the consolidated net profit per share of the remuneration system for the Management Board of Deutsche Postbank AG second fiscal year after the current fiscal year exceeds the consoli and approved adjustments to the remuneration system, taking new dated net profit per share for the fiscal year prior to the current statutory and regulatory requirements into account. In the future, fiscal year. remuneration of the Management Board will be more strongly oriented on sustainable corporate development. The Chairman of the Supervisory Board receives double the remuner ation of a full member of the Supervisory Board, while the Deputy Overall remuneration will continue to consist of fixed and perfor Chairman receives one and a half times the remuneration. The chair mance-related components. manship of a Supervisory Board committee is remunerated by an additional sum in the amount of the remuneration, while members of The base pay (fixed components), other compensation and pension the Supervisory Board committees additionally receive half this Group Management Report commitments are not linked to performance. Base pay is paid as a amount for each such position held. This does not apply to member monthly salary in twelve equal installments. ship of the Mediation Committee and the Nomination Committee.

The annual bonus is linked to performance. For further information on and explanations of the remuneration of

the Management Board and Supervisory Board, please see the corpo 26 150 The annual bonuses awarded to the members of the Management rate governance report or Note (56) of the notes to the consolidated Board are based on the achievement of quantitative and/or qualita financial statement. tive targets. These targets form part of a target agreement estab lished at the start of each fiscal year (base year). The size of the bonuses is based on the degree to which predetermined target values are reached or exceeded. The size of the bonus continues to be Consolidated Financial Statements capped on the basis of individual agreements.

In the future, the annual bonus will no longer be paid out in full on an annual basis, even when the targets agreed on have been reached.

47 Fiscal Year I Group Management Report I Employees I Macroeconomic environment in 2009

I Employees The global economic and financial-market crisis also triggered a deep recession in the euro zone at the beginning of 2009. Exports collapsed. At the end of 2009, the Postbank Group employed 20,857 full-time Companies reduced investments at unprecedented levels and speed. equivalents, about 270 fewer than as of December 31, 2008. Unemployment rose substantially, leading consumers to cut back on This figure includes around 200 full-time equivalents who were their spending. Not least because of the sweeping government stimu brought on board during the consolidation of BCB Processing GmbH lus programs, the economy began to stabilize in the spring, and a and the integration of two subsidiaries who had not yet been consol moderate economic recovery followed in the second half of the year. idated, BHW Direkt GmbH and PB easytrade GmbH, into PB Direkt But this recovery was not nearly strong enough to offset the previous GmbH, the new call center subsidiary. The number of employees thus slump. As a result, GDP fell by 3.9 % in 2009. declined by around 470 full-time equivalents, compared with the end of fiscal year 2008. The overall number includes some 7,000 civil German economy experiences its worst postwar recession servants, who make up about 33 % of employees. Around 25 % of The German economy was hit particularly hard by the global eco our employees have part-time employment contracts. nomic crisis. In 2009, GDP plunged 5.0 % from the previous year’s level, even though positive growth rates began to be generated in Our external staff turn-over rate in 2009 was around 3.7 %. The average the second quarter compared with the previous quarter. Germany’s length of a person’s employment at the company was approximately extensive reliance on exports proved to be its Achilles’ heel during 22 years. Deutsche Postbank AG remunerates almost all of its the global recession. In the winter period of 2008/2009, exports employees on the basis of fixed and performance-related criteria that plunged steeply. Year-on-year, exports fell 14.2 % in 2009. Because flow into a variable remuneration component. the decrease was much smaller for imports, foreign trade was the cause of the 3.0 percentage-point drop in GDP. During the crisis, companies also dramatically lowered their gross capital expenditures I Macroeconomic environment in 2009 and inventories. The latter resulted in a negative impact on GDP growth of 0.9 of a percentage point. Investments in machinery and Global economy equipment were cut by 20.5 %. By contrast, investments in construc At the beginning of 2009, the world’s economy was experiencing its tion proved to be comparatively stable, dropping only 0.8 %. This was most deeply reaching recession in decades. As a result of the financial- not least the result of a government-funded infrastructure program, market crisis, companies dramatically cut back on their investments. which contributed to a 5.2 % increase in public-sector investments Industrial production suffered an unparalleled reversal. International in construction. By contrast, investments in residential construction trade was hit hardest by the crisis, however. Many countries reacted dropped by 0.8 % and in commercial construction by about 3 %. to this extreme situation by initiating sweeping rescue programs in an attempt to stabilize the economy. As the year proceeded, these Private consumption in Germany grew by a real 0.2 % in 2009 and programs began to bear fruit. The global economy and worldwide turned out to be a stabilizing factor during the crisis. The slight trade recovered from the previous setbacks. Nonetheless, global eco increase was stimulated by the government-funded cash-for-clunkers nomic output contracted by 0.8 % in 2009 after growing by 3 % program, which fueled a large increase in spending for transport during the previous year. and telecommunications. Private households also benefited from the high level of price stability. At an annual average of 0.4 %, the In 2009, the United States experienced its worst economic downturn inflation rate was at its lowest level since German reunification. The in 60 years. Gross capital expenditures were dramatically affected, German job market proved to be astonishingly robust in face of the plunging by about 18 %. Exports and imports also plunged at un- extent of the steep economic downturn. On average, the number of usually high rates. Despite government-sponsored incentives like tax unemployed people increased only by 155,000 workers during the breaks and cash-for-clunkers programs, private consumption fell year. The unemployment rate rose by 0.4 percentage point to 8.2 %. below the previous year’s level. The economic problems were restricted At the same time, the number of hours worked dropped in nearly to the beginning of the year. By the second half, the economy had all economic areas as a result of the wide-scale use of shortened already recovered. But this improvement could not prevent the gross workweeks, the reduction of hours in working-time accounts and domestic product (GDP) from slipping 2.6 % overall in 2009. temporary workweek cutbacks governed by collective-bargaining agreements. The emerging countries of Asia were indeed affected by the global economic crisis. But they were able to get back on their feet much In general, macroeconomic developments in Germany and other faster than other regions. By spring, impressive growth rates were major economies were much more unfavorable in 2009 than we had being generated once again. China set the pace, with a massive expected at the time of our last Annual Report. infrastructure program underpinning the domestic economy. Even though exports plunged by 16 %, growth in 2009 GDP slipped only Market developments slightly to 8.7 %. Japan was hit particularly hard by the plunge in At the beginning of 2009, financial markets were in a state of paraly international trade as a result of its extensive dependency on sis that was triggered by the collapse of the U.S. investment bank exports. In 2009, exports sank nearly 25 % compared with the previ Lehman Brothers in September 2008 and was further intensified by ous year. Faced with these business conditions, companies made ever-clearer signs of the immense global recession. Conditions wors drastic cuts in their investments. Despite the economic recovery that ened in nearly every market segment well into March. But as spring occurred as the year progressed, GDP fell measurably in 2009 by began, the sweeping government economic-rescue packages and more than 5 %. the strategy of leading central banks to provide market participants

48 Fiscal Year I Group Management Report I Employees I Macroeconomic environment in 2009

massive amounts of liquidity at extremely reasonable conditions As a result, the yield curves steepened significantly in both the euro had a positive impact. These efforts were supported by the gradual zone and the United States during the year. economic recovery that occurred as the year progressed. Investor wariness and market players’ distrust of one another slowly faded. Foreign-exchange markets were affected in particular by the widely By year’s end, the resulting decline in risk aversion and the large alternating appetite for risk among investors and market players. amount of available liquidity had noticeably settled financial mar During the first months of 2009, the dollar profited from its role as kets. During the year, risk premiums in virtually all market segments a “safe haven,” a development that caused the euro to fall from fell below the level demanded before the financial crisis escalated about $1.40 at the beginning of the year to $1.25 in March. Once For our Shareholders in the fall of 2008. the financial markets recovered strongly, the security factor moved An unsere Investoren increasingly into the background. As a result, the euro climbed above At the beginning of the year, stock market prices came under massive the level of $1.50. By year’s end, it stood at about $1.43, 2.7 % downward pressure. Deeply reduced earnings expectations and above the rate at the end of the previous year. worries about a substantial jump in the number of insolvencies sent leading stock indexes of industrial nations plunging more than 25 % The markets tended to move in the direction that we expected in through March. Financial stocks were hit particularly hard once the last Annual Report. We had anticipated for 2009 a modest rise again as the financial crisis led to a continued need for substantial in yields in the euro zone and a steepening of the yield curve. The writedowns and impairments at banks. As the economic stabilization interest-rate cuts and the drop in money-market interest rates were began and the sweeping steps taken by governments and central much more extensive than forecast. Our Business Divisions banks to prop up the economy and financial markets took hold, a Unsere Geschäftsfelder reversal occurred. The leading stock indexes quickly rebounded from Sector situation their bottoms. By year’s end, indexes had risen dramatically. The DAX Since the financial-market crisis erupted in mid-2007, the volume of climbed about 24 % during the year. The EURO STOXX 50 and the writedowns caused by distressed assets, impairments and losses at S&P 500 followed suit, rising + 21 % and + 23 %, respectively. These financial institutions around the world has totaled about $1.7 trillion. factors also had a positive effect on the prices of other securities. During the same period, these institutions raised about $1.5 trillion Risk premiums for corporate bonds did indeed rise at first. But they in fresh capital, some of which was provided by government-backed ended 2009 well below the levels seen at the beginning of the year, relief funds, to strengthen their equity base. Overall, tensions eased and they frequently were below the levels reached immediately after in 2009 compared with the previous year. While financial institutions Our Responsibility Our Responsibility the finance crisis began to escalate in the fall of 2008. had to absorb considerably more than $1,000 billion in writedowns, impairments and losses for the entire year of 2008, this figure In response to the weak economy and the financial-market crisis, amounted to less than $340 billion in 2009. Because the reporting leading central banks introduced extremely expansive monetary season for financial institutions for fiscal year 2009 has not been policies in 2009. The Federal Reserve in the United States kept its concluded yet, this total may indeed rise for 2009. But it should key interest rate at nearly 0 % throughout the year. In addition, it remain considerably below the 2008 level overall and thus under provided large amounts of liquidity by taking unconventional steps, score an easing of tension on financial markets. After some U.S. particularly the direct purchase of securities. banks began in the first half of 2009 to repay portions of the govern ment support they had received, various European lending institu The European Central Bank (ECB) cut its key rate from 2.5 % at tions followed their example in the second half of the year. But even the beginning of the year to 1 % in May and kept it at this level for after two years, the global financial-market crisis cannot yet be Group Management Report the remainder of the year. Beginning in June, it opened bidding on assigned to the history books. In 2009, 140 banks in the United 12-month refinancing operations for the first time and launched a States filed for bankruptcy, almost six times as many as in the pre program to purchase covered bonds in July. As a result of these vious year. This was the largest wave of insolvencies since 1992. unconventional steps, the monetary policy in the euro zone was even more expansive than the key interest rate of 1 % indicated. In Germany, various private and public-sector banks utilized govern Subsequently, very short-term money-market rates fell below this level. ment economic bailout funds in 2009 in connection with the global During the second half of the year, these rates were closely oriented financial-market crisis in the banking sector. on the deposit-facility rate, which was reduced to 0.25 %. In analyzing business developments at German banks, we consid Fears of a prolonged economic crisis and the related flight into the ered, as we did in the previous quarter, the banks listed in Deutsche safe havens of government bonds caused capital-market interest Börse’s Prime Standard with the exception of Hypo Real Estate. Consolidated Financial Statements rates in the euro zone to fall to historical lows at the turn of the Overall, a mixed picture emerges from a comparison of business year 2008/2009. As signs of economic stabilization emerged and the results from the first three quarters of 2009 in comparison with those appetite for risk increased once again as a result, these rates tended of the previous year’s period. All banks were indeed able to increase to move upward beginning in April despite the continued cuts made net interest income. But all of them raised their allowances for in key interest rates. After reaching an interim high in June, the losses on loans and advances, and just one bank was able to boost upward movement eased considerably in the second half of the its net interest income following its allowance for losses on loans year. By the end of 2009, the yield of 10-year German bunds was and advances year-on-year. Net fee and commission income fell at about 3.4 %, a good 0.4 percentage points above the previous year’s nearly all institutes, and just one bank was able to cut administra Other Information level. By contrast, the yield of 10-year U.S. government bonds tive expenses. Half of the banks improved their net trading income climbed considerably by about 1.6 percentage points to a good 3.8 %. or increased their return on equity. With one exception, all banks

49 Fiscal Year I Group Management Report I Net Assets, Financial Position, and Results of Operation

lowered their cost-income ratios and reported a post-tax profit. In Significant events after the reporting date operational terms, only half of the banks were operating at a profit. No significant events have occurred since the balance sheet date. On the stock market in the fourth quarter, the four German banks were unable to continue performing as well as they did in the previ Postbank’s investment focus in 2009 ous two quarters. All four saw their shares fall in the fourth quarter Investment focuses of Postbank in 2009 consisted of strategic projects of 2009. In terms of the unweighted average, their stock prices in our customer business as well as the introduction of refined models dropped about 15 % during this period, significantly underperforming to measure risk and to optimize liquidity-management systems. the DAX, which rose 5 %. The stock prices of all four banks remain considerably below the individual levels they reached before the Investments in measures to achieve SEPA compliance and to imple financial crisis began in mid-2007. ment legal and regulatory requirements, including the Payment Service Directive and the consumer-loan regulation as well as the Bilanzrechts The banking landscape in Germany continues to be characterized modernisierungsgesetz (BilMoG – German Accounting Modernization by the three-pillar structure of private banks, savings banks and Act), Basel II and the flat tax, also moved forward. Planning for the cooperative banks. During the fourth quarter, no consolidation creation of a strategic reporting architecture was also initiated. activities among the individual pillars were observed. Within the private-banking pillar, the takeover of Sal. Oppenheim jr. & Cie. KGaA To improve the approach to customers, partnership projects designed by Deutsche Bank took concrete shape as expected. Both parties in to ensure national availability of cash to customers were started. In addi the transaction agreed on the conditions in a framework agreement. tion, work continued on the project called “strategic branch-network The acquisition is scheduled to be completed in the first quarter management,” in which Postbank branches are being modernized. of 2010. In Transaction Banking, preparations are under way to take over the Significant events at Postbank in 2009 payment-transaction processing of our new customer HSH Nordbank. On February 5, 2009, Postbank issued its third Jumbo Hypotheken pfandbrief with a volume of €1 billion and a five-year term. I Net Assets, Financial Position, and Results of On February 19, 2009, Postbank announced its preliminary annual Operations results for 2008. The Annual Report was released on March 9, 2009. Income Statement Deutsche Bank announced on March 9, 2009, that it now held a stake Tough conditions on international financial and real estate markets of 25 % plus one share in Postbank. The shares were primarily acquired as well as in the real economy continued in the year under review. during the completion of a transaction with Deutsche Post AG. Germany suffered record falls in economic output in the first half of the year in particular. Weak growth in the global economy also The Annual General Meeting of Deutsche Postbank AG was held on extended to international real estate markets, particularly in the U.S.A. April 22, 2009, in Frankfurt. All motions were approved by large and the United Kingdom. majorities. The adverse conditions in the business environment also impacted At its meeting on May 29, 2009, the Supervisory Board of Deutsche earnings in the Postbank Group. Even though customer business Postbank AG appointed Stefan Jütte to become the new Chairman of performed well, particularly in the Retail Banking and Corporate the Bank’s Management Board effective July 1, 2009. Before making Banking segments in Germany, the income statement was hit by the appointment, the Supervisory Board and the previous Chairman negative effects from the Bank’s risk positions caused by the unfavor of the Management Board, Wolfgang Klein, decided under amicable able external factors. However, the impact from these extraordinary conditions and in mutual agreement that he would step down on factors was considerably less than in 2008. Taking into account June 30, 2009, after nine years of successful service at Postbank. positive tax effects, Postbank therefore ended fiscal year 2009 with a Dirk Berensmann, the Management Board member serving as COO consolidated net profit of €76 million (previous year (restated): net for the IT/Operations division, and the Supervisory Board of Postbank loss of €886 million). The loss before tax was €398 million compared reached an agreement on the end of his responsibilities effective with a restated loss before tax of €1,064 million in 2008. May 29, 2009. He was succeeded on May 30, 2009, by Mario Daberkow, who previously oversaw Transaction Banking at Postbank in his The figures for 2008 have been restated following a random sampling capacity as Executive Manager. examination conducted by the Deutsche Prüfstelle für Rechnungs legung e.V. (Financial Reporting Enforcement Panel, FREP). The FREP On July 3, 2009, Postbank issued its first Öffentlicher Pfandbrief with was of the opinion that additions to allowance for losses on loans a volume of €1 billion. On August 20, 2009, the total was increased and advances of approximately €90 million posted during the first to €1.5 billion. nine months of 2009 should have been recognized at the end of 2008. In order to avoid delaying the 2009 financial statement prepa On November 25, 2009, Postbank announced as part of a sharpening ration process, the Company has concurred with this appraisal, of its strategic focus that it intended to achieve an operating return particularly as it results in no change to net profit/loss when viewed on equity after taxes of about 13% over the medium and long term. across both reporting periods. The period shift led to an improvement To strengthen its equity base, Postbank intends to retain its profits in the profit before tax for 2009 and corresponded to a negative 112 through 2012. effect on last year’s figures in the indicated amount (see also Note 6).

50 Fiscal Year I Group Management Report I Net Assets, Financial Position, and Results of Operation

Postbank can look back on a positive fiscal year 2009 overall as far other non-fixed-income securities decreased significantly in 2009 by as customer business is concerned despite the challenging economic approximately €70 million following the complete liquidation of our environment and a market that continued to be fiercely competitive. equity holdings in 2008. A significant feature of new business in Retail Banking was the sharp growth in savings business. Postbank was able to expand the deposit During the course of 2009, net interest income has steadily increased volume significantly, thereby also reinforcing its liquidity position, since the second quarter. This development was due to the positive which was already strong. Postbank pushed ahead with growth in its impact from the steeper yield curve and the gradual fall in interest retail and corporate customer lending business, exploiting gaps in expense in line with low interest rates, among other things. As a For our Shareholders the market left open by some of its competitors. Overall, the Bank result, net interest income in the last quarter of 2009 amounted to An unsere Investoren managed to improve its market position and gain market share in an encouraging €621 million, an increase of €43 million or 7.4 % on various core business segments. Postbank intends to secure and the third quarter. enhance the success with Postbank4Future, its strategic program presented at the end of 2009. Net income from investment securities Net income from investment securities amounted to €–148 million The positive trend in customer business is only reflected to a limited as of December 31, 2009 (December 31, 2008: €–1,249 million). extent in the income statement because of the adverse impact caused In 2008, a number of factors had had a considerable adverse effect by the general business environment. Performance in the operating on net income from investment securities, including the complete income lines – net interest income and net fee and commission liquidation of equity holdings implemented as part of our program in Our Business Divisions income – was comparatively sound taking into account the difficult the fourth quarter of 2008 to reduce our capital market investments Unsere Geschäftsfelder economic environment faced by Retail Banking. We were able to and exposure to the associated risks. achieve considerable reductions in administrative expenses by contin uing to apply rigorous cost management despite some additional In fiscal year 2009, impairment losses on structured credit products burdens and one-time costs beyond our control, such as contributions included in net income from investment securities amounted to €97 to deposit protection schemes and the recognition of restructuring million. Some of these negative effects were attributable to a review provisions. In contrast, we increased allowances for losses on loans and adjustment of certain input parameters for the mark-to-model and advances significantly year-on-year as a result of the overall eco measurement of our structured credit products, the input parameters nomic slowdown and the continued uncertainty in international real concerned being related to market trends and forecasts. The effects Our Responsibility Our Responsibility estate markets. However, this increase remained within our forecasts impacted net trading income and net income from investment securi for 2009. In international comparison, Postbank continued to ties by a total of €–157 million in the fourth quarter. €–51 million of show a relatively low need for allowances for losses on loans and this amount was recognized under net income from investment securities. advances in 2009 overall owing to the significant proportion of highly The step was intended to reduce the volatility resulting from this net collateralized retail customer loans. Net trading income and net income component in future periods. income from investment securities suffered some adverse impact, particularly from structured credit substitution business, although the In the previous year, impairments on our structured credit products extent of this impact was less than in 2008 in line with our forecasts. had amounted to a total of €156 million. We also recognized write downs of €170 million (previous year: €468 million) on securities, Changes in the individual items in the income statement and balance retail funds and equity investments. sheet are explained in the following. Unless otherwise stated, the Group Management Report comments relate to the comparison with the restated figures for fis In contrast, the overall trend as far as our banking book is concerned 112 cal year 2008 or the previous quarters in 2009 (see also Note 6). was encouraging. In the second half of the year we were once again able to realize limited gains on the sale of securities held in our portfolio. Individual items Net trading income Net interest income The continuing volatility in the market also affected net trading The low interest rate level and the sharp drop in short-term interest income in fiscal year 2009. At the end of the year, net trading income rates during 2009 represented a challenge for deposit-rich banks such amounted to €– 498 million compared with €-389 million in 2008. as Postbank in terms of generating net interest income from savings and demand deposits. Although the pressure on margins in these The Bank’s underlying net trading income profited from gains on our

product areas eased during the course of 2009, it still remained con swap positions used for hedging and for managing the banking book Consolidated Financial Statements siderable compared with 2008. On the other hand, we are benefiting as part of asset/liability management. Total income from this source from the steeper yield curve in comparison to 2008, for example from amounted to €100 million (previous year: €554 million) (see also the natural maturity structure of our customer business with its rela Note 10). However, a clear loss was recognized on the measurement tively short-term deposits and long-term loans. of embedded derivatives from the structured credit substitution business. The total loss amounted to €652 million as against a loss In this tough environment, net interest income fell by €90 million of €786 million in 2008. year-on-year to €2,405 million, a decrease of 3.6 %. It should be noted here that net interest income in 2008 was higher than would As in net income from investment securities, some of these adverse Other Information otherwise have been the case owing to one-time factors in the effects were attributable to a review and adjustment of input param fourth quarter of 2008. In addition, current income from equities and eters for the mark-to-model measurement of our structured credit

51 Fiscal Year I Group Management Report I Segment Reporting

products. This additionally impacted the item by €106 million in the The net addition ratio for allowances for losses on loans and advances fourth quarter of 2009. in the customer loan business amounted to 63 basis points. Despite the increase, the ratio therefore continued to be maintained at a Overall, impairments on our structured credit substitution business relatively moderate level compared with other German or European amounted to €180 million in the fourth quarter of 2009 (previous banks. year: €388 million) resulting in net trading income of €– 149 million (previous year: €– 406 million). Adjusted for the one-time effects The development in allowances for losses on loans and advances in mentioned above, net trading income would have benefited in the the lending business is a consequence of the economic slowdown fourth quarter from a further noticeable decrease in the negative and in particular the tense situation that continues to prevail on impact from the structured credit substitution business. international real estate markets. Thus, the increase of €225 million in specific valuation allowances to €746 million is primarily attributable Net fee and commission income to commercial real estate finance exposures. We have also increased In fiscal year 2009, net fee and commission income was €1,329 million allowances for losses on loans and advances in other Corporate compared with €1,431 million in 2008. In the second half of the year, Banking business. Taking into account the weak overall economic this item reached €684 million, significantly higher than the figure growth in Germany, Postbank saw a comparatively moderate increase of €645 million for the first half of the year. Despite continuous in the need for allowances for losses on loans and advances in the improvement over successive quarters in 2009, net fee and commission private lending business in the year under review. In this regard, income failed to reach the good level achieved in 2008. The decrease Postbank benefits from the large proportion of highly collateralized in net fee and commission income reflects the general trend in the private mortgage lending in its credit portfolio. sector and is based on two significant factors. In the fourth quarter, allowances for losses on loans and advances First, particularly in the first half of 2009, continuing uncertainty rose to €308 million (previous year: €194 million), a sharp increase on the part of retail customers led to a noticeable lack of customer in the quarter-by-quarter comparison. Given the persistent difficulties appetite in the term life insurance and securities business, business in business conditions, the Bank carried out a review of risk positions that is based on a more long-term approach. As a result of these in this quarter, particularly in the subportfolios in the U.S.A. and the challenging conditions, net fee and commission income from the United Kingdom. The outcome was a further adjustment in allow securities business fell by €32 million to €133 million. Consequently, ances for losses on loans and advances for this area of business in total net fee and commission income from the banking business was the fourth quarter. €685 million, 8.5 % down on the prior-year figure. Administrative expenses Second, Postbank’s net fee and commission income was also adversely In fiscal year 2009, there was a substantial drop of €105 million or affected from a structural point of view by a drop in receipts from the 3.5 % in administrative expenses to €2,864 million. This development sale of postal services in our branches and a decrease in income from is all the more encouraging since there was a significant year-on-year Transaction Banking. In total, the contribution from these units to net rise of €50 million in cost items beyond our control, such as contri fee and commission income declined by €34 million compared with butions to the Pensionssicherungsverein (German Pension Insurance the previous year. Association) and the deposit protection fund. In addition, the discon tinuation of the consolidated tax group with Deutsche Post caused Total income an increase in administrative expenses of €17 million in 2009. In the There was an encouraging increase in total income from €2,288 million fourth quarter, there were additional one-time charges of €25 million in 2008 to €3,088 million for full-year 2009. The main reasons for relating to impairment losses on property and €30 million resulting this improvement were the lessening of the adverse impact from the from the recognition of restructuring provisions. financial crisis on net trading income and net income from invest ment securities together with the solid revenue streams from our The trend in costs demonstrates Postbank’s rigorous approach to customer business. cost control and is particularly attributable to active management of other administrative expenses, which were reduced by €78 million Allowances for losses on loans and advances to €1,295 million. Despite the recognition of the restructuring provi Allowances for losses on loans and advances amounted to €678 million sions mentioned above, there was a slight reduction in staff costs of in fiscal year 2009 compared with €498 million in 2008. As described €4 million to €1,406 million. above, the prior-year figure was retrospectively increased by €90 million as a result of a period shift relating to allowances for losses We will also continue to pay close attention to the management of on loans and advances during the 2009 financial statements prepara costs as part of our Postbank4Future strategy program. Under this tion process. However, allowances for losses on loans and advances strategy, we are planning to bring down the level of costs by 2012 were not reduced by the same amount during the first nine months by around 5 % as compared to the 2008 year-end figure. This corre of the year under review owing to the effect of unwinding. Only €84 sponds to a further reduction on top of the extensive cost cuttings million was deducted in 2009 from allowances for losses on loans achieved in 2009. and advances with the remaining €6 million being reported under net 112 interest income (see also Note 6). Other income Net other income and expenses declined from €115 million in 2008 to €56 million in 2009. One notable reason for this decrease is the

52 Fiscal Year I Group Management Report I Segment Reporting

year-on-year fall in the share of Deutsche Postbank AG’s profit or loss €85 million in net interest income to €2,141 million. The segment for the period attributable to silent participations and certain profit was able to improve net interest income from quarter to quarter by participation rights. means of a gradual reduction in the costs of liabilities. Net interest income in the fourth quarter was €551 million, €14 million up on the Profit/loss third quarter. In the year under review, the loss before tax amounted to €398 million compared with a loss before tax of €1,064 million in the The segment’s net trading income unrelated to customer business previous year. saw a year-on-year contraction of €57 million to €– 32 million. For our Shareholders The item includes the recognition of measurement changes from the An unsere Investoren As regards income taxes, positive special factors resulted from the application of the fair value option in hedging the mortgage loan reversal of deferred taxes, after the underlying facts were clarified portfolio at our subsidiary BHW Bausparkasse AG. As a consequence and a tax burden is no longer anticipated, and from tax-free income, of the sharp fall in short-term interest rates at the start of 2009, among other things. The taxes item amounted to €475 million these changes amounted to significant losses in contrast to the positive compared with €179 million in 2008. Postbank therefore generated contribution to net trading income made by gains at the end of 2008. consolidated net profit of €76 million following a net loss of €886 million In net income from investment securities for the segment, income in 2008. was offset by an equal amount of expenses. In 2008, there had been a net loss of €2 million. At €298 million, total comprehensive income required to be reported Our Business Divisions under IFRSs was clearly positive (previous year: loss of €1,054 million) Net fee and commission income amounted to €1,113 million and Unsere Geschäftsfelder due to the positive changes in the present values of the positions thus fell €65 million short of the figure generated in 2008. Over the held in the revaluation reserve. These changes are not recognized whole of 2009, it was noticeable that our customers were taking a directly in income as the positions are held in the banking book. particularly cautious approach as a result of economic conditions. This applied particularly to our customers in the securities and funds Earnings per share was €0.35 (previous year: €– 5.26). business as well as in the endowment insurance business which is of a more long-term nature from a customer perspective. This led to The return on equity after tax was slightly positive at 1.5 % (previous a considerable fall in net fee and commission income in our bank year (restated): – 19.4 %). The cost/income ratio was down to 92.7 % ing business, particularly in the first quarter of 2009, although there Our Responsibility Our Responsibility compared with the 2008 restated figure of 129.8 %. was a gradual recovery over subsequent quarters. Total net fee and commission income in the fourth quarter was €296 million, which equates to an increase of 6.1 % on the third quarter. The segment I Segment Reporting continued to suffer the negative impact from the structural decrease in income from our business with postal services and new services at In the first quarter of 2009, Postbank added the Consolidation seg our branches. This income was down 4.8 % year-on-year. ment to its segment reporting in the interest of greater transparency when reporting internal revenues and expenses between Postbank As of December 31, 2009, total income for the segment was €3,222 units that had previously been reported in the Others segment. million, €205 million below the prior-year figure.

Additionally, some minor adjustments were made with respect to the Rigorous management of costs had a positive impact on the trend Group Management Report allocation of income and expenses across the Others, Retail Banking in administrative cost. Administrative cost for the year under review and Corporate Banking segments. There were no changes to the amounted to €2,136 million, a year-on-year improvement of €84 Transaction Banking and Financial Markets segments. million. The long-term management of our administrative expenses is also one of the key elements in our Postbank4Future strategy We have restated the figures for 2008 in line with this in order to program. In future, we will therefore continue to recognize the ensure comparability for the comments that follow. For an overview important role played by administrative cost in our standard retail of the modifications made to segment reporting, please also refer banking business. 133 to Note 40. We also increased the allowance for losses on loans and advances in Retail Banking the retail banking business as a result of the weak economic environ

At €770 million, profit before tax in the Retail Banking segment ment in Germany in the year under review. The item increased by Consolidated Financial Statements was down €159 million on the strong figure achieved in 2008. €41 million to €345 million. Overall, the quality of loans in the retail Approximately €55 million of this decrease was due to factors that banking business remained comparatively stable, especially in our are unrelated to customer business. very granular and highly collateralized private mortgage lending port folio. Net interest income continued to be the dominant earnings component, accounting for more than 66 % of total revenues for the segment. Net other income and expenses rose by €3 million to €29 million, In 2009, the yield curve and specifically the considerable drop in largely reflecting the effects of provisions recognized by the sub short-term interest rates presented a major challenge as regards the sidiaries assigned to the segment. Other Information development of net interest income in Postbank’s deposit business. These business conditions were the main reason behind the fall of

53 Fiscal Year I Group Management Report I Segment Reporting I Total Assets

In 2009, the cost/income ratio for the Retail Banking segment was The cost/income ratio improved to 39.5 % in 2009 compared with 66.3 %, 1.5 percentage points up on the previous year. The return on 106.9 % in 2008, while the return on equity before tax rose from equity before tax amounted to 34.9 % in 2009, down on the prior- – 37.4 % to – 4.8 %. year figure of 41.9 %. Transaction Banking Corporate Banking At €39 million, profit before tax in the Transaction Banking segment Profit before tax generated by the Corporate Banking segment in was €9 million below the record level achieved in 2008. Net fee and 2009 was €– 26 million, which corresponds to an increase of €127 commission income for the segment decreased by €18 million to million on 2008. This segment result includes the shift in allowances €322 million as a result of a slight drop in transaction volumes com for losses on loans and advances between periods as described above. pared with 2008 and the structural decline in paper-based bank Total allowances for losses on loans and advances of approximately transfers. €90 million originally recognized in the first three quarters of 2009 were transferred retrospectively to 2008. The clearly positive trend in Administrative expenses rose to €317 million, a slight increase of €5 million. operating income made a key contribution to the improvement of the However, these expenses include restructuring provisions of €16 million segment result. In addition, the segment benefited from an easing in recognized in the fourth quarter which dilute the true year-on-year the negative effects arising from securities portfolios allocated to the change in this item. Adjusted for these one-off effects, administrative segment and from the structured credit substitution business com expenses would have shown a 3.5 % year-on-year improvement pared with the corresponding effects in 2008 driven by the escalation accompanied by an increase in profit before tax. in the financial market crisis. In contrast, there was an increase in allowances for losses on loans and advances owing to the significant Net other income and expenses – which largely arises from the economic slowdown and the ongoing difficulties in international real provision of services for third parties – saw some encouraging growth, estate markets. the figure increasing by €17 million year-on-year to €33 million.

The segment saw a sharp rise of €157 million in net interest income The cost/income ratio for the segment rose from 90.7 % in 2008 to to €543 million. The factors behind this increase included the sub 98.1 % in 2009. stantial expansion in business volume and improved margins in new business. Financial Markets Profit before tax in the Financial Markets segment amounted to Taken together, net trading income and net income from invest €60 million in fiscal year 2009 compared with a loss before tax of ment securities improved by €142 million to €– 191 million owing €14 million in 2008. The positive factors underlying this result were to a decline in the negative effects of the financial market crisis. an increase in net trading income and an easing in the negative Net income from investment securities amounted to €– 51 million effects from the financial market crisis. compared with €– 241 million in 2008, and net trading income was €– 140 million compared with €– 92 in 2008. The negative effects Net interest income for the segment fell by €37 million to €125 million, arising from our structured credit portfolio contained in the two while net fee and commission income decreased by €30 million to items amounted to €157 million (of which €30 million in the fourth €27 million. In contrast, net trading income climbed to €47 million, quarter), compared with €146 million in the corresponding prior-year an increase of €53 million. There was also a significant improvement period. The segment result included impairment losses of €50 million in net income from investment securities, which ended the year at on other securities (previous year: €186 million). €35 million of this €– 21 million compared with €– 110 million in 2008. figure related to the fourth quarter of 2009. The segment result includes effects from the structured credit port At €104 million, net fee and commission income was down by €3 folio amounting to €– 34 million. Of this amount, €– 30 million is million year-on-year. Total income for the segment therefore amounted recognized within net trading income (of which €– 14 million in the to €456 million, €296 million up on the previous year’s figure. fourth quarter), and a further €– 4 million within net income from investment securities (of which €+3 million in the fourth quarter). There was only a slight increase of €9 million in administrative In the prior year, negative effects of €38 million were recognized, of expenses to €180 million. which €15 million related to net income from investment securities. In addition, impairments on securities of €20 million were recognized Allowances for losses on loans and advances were €300 million in the year under review (previous year: €83 million). in full-year 2009, €157 million more than the restated figure for 2008. This increase was a consequence of the economic slowdown Allowances for losses on loans and advances amounted to €33 and in particular the ongoing difficulties in international real estate million as against €22 million in 2008 and related to writedowns markets. Given the persistently tough business conditions, the Bank of promissory note loans recognized in this item of the income carried out a comprehensive review of risk positions in the fourth statement. quarter, particularly in the subportfolios in the U.S.A. and the United Kingdom. Allowances for losses on loans and advances in the Administrative expenses improved by €2 million to €90 million and Corporate Banking segment in the fourth quarter totaled €183 million the resulting cost/income ratio for this segment in 2009 was 50.6 % (previous year (restated): €112 million). following 89.3% in 2008. Return on equity before tax rose accord ingly from – 2.2 % to 8.1 %.

54 Fiscal Year I Group Management Report I Segment Reporting I Total Assets

Others Consolidation The Others segment reported a net loss for 2009 of €1,241 million, As already explained in previous reports, this new segment – intro which represents an improvement of €633 million on 2008. This seg duced in the first quarter of 2009 – encompasses the internal trans ment contains items not directly attributable to the other business actions between the Postbank Group’s consolidated companies. segments, unallocated central function costs, and the result of It therefore generally reports a balanced result. Postbank’s own-account transactions. This segment therefore had to bear a significant proportion of the negative effects from the Key consolidation adjustments are made within net fee and commis financial market crisis. sion income, and primarily comprise adjustments to payments for the For our Shareholders provision of payment services for Postbank that are recognized in An unsere Investoren The segment’s net interest income declined by €215 million to €– 496 income for the Transaction Banking segment. Consolidation adjust million. The net interest expense is due among other things to dis ments amounted to €–195 million in 2009 as compared to €–212 posals of banking book and trading book assets, contributions from million in the previous year. asset/liability management, the transfer pricing system in place up to and including 2004, and the acquisition of the BHW Group and Additionally, consolidation adjustments made within administrative Postbank Filialvertrieb AG in 2006. expenses amounted to €781 million (previous year: €799 million). This is primarily attributable to the cost allocation of IT and Transaction Net trading income for the segment saw an improvement of €43 million Banking services provided within the Group. Net income and in 2009 to €– 282 million. Net trading income was primarily impacted expenses primarily eliminates income from internally invoiced IT Our Business Divisions by losses on the measurement of embedded derivatives contained in services which is included as other income in the item of the same Unsere Geschäftsfelder structured credit products of €468 million (previous year: €676 million), name in the Others segment. €138 million of which relates to the fourth quarter of 2009. In addi tion, impairments on guaranteed promissory note loans of €133 million had been recognized in the previous year. In contrast, gains of €100 I Total Assets million from asset/liability management (previous year: €554 million), which arose from the use of derivative financial instruments, had a Total Assets positive effect. Postbank’s total assets declined to €226.6 billion, a decrease of approximately €4.6 billion compared with December 31, 2008. On the Our Responsibility Our Responsibility Net income from investment securities for the segment amounted assets side of the balance sheet, we substantially reduced our port to €– 76 million, an improvement of €819 million on the previous folio of investment securities by €10.7 billion to €72.4 billion as part year which had been heavily burdened by the negative impact of the of our program to scale back our capital market investments and financial market crisis. The contributing factors to this net loss included exposure to the associated risks. At the same time, we expanded our writedowns of structured credit products of €90 million (previous customer lending business by €5.7 billion to €111.0 billion. year: €93 million), €49 million of which relates to the fourth quarter of 2009. In addition, we recognized impairment losses on other debt On the liabilities side, we achieved further improvements in the qual instruments and retail funds of €96 million (previous year: €204 million), ity of the source of funds. This resulted in a significant increase in €17 million of which relates to the fourth quarter of 2009. In addi amounts due to customers, particularly following the success of our tion, in the previous year a loss of €581 million was attributable to savings business, the figure rising by €14.5 billion to €132.0 billion. the complete liquidation of our equity holdings. At the same time, we were able to reduce deposits from other banks Group Management Report by €23.5 billion to €39.3 billion. Net fee and commission income for the segment fell by €9 million to €– 42 million. Thus, total income for the segment amounted to There was a further contraction in the balance sheet compared with €– 896 million, up €638 million on the previous year’s figure. September 30, 2009, the decrease over this period amounting to €12.7 billion. The segment’s administrative expenses improved by €51 million to €922 million. The item primarily comprises corporate function costs Overall, the asset-side receivables demonstrate a good risk structure of €329 million that cannot be directly allocated to the operating by both national and international standards. Our lending business segments (previous year: €240 million). The main reasons for the rise is dominated by granular, highly collateralized German private in these expenses were higher deposit protection costs and increased mortgage loans, government bonds, covered bonds, and other prime- contributions to the Pensionssicherungsverein (German Pension rated investments. At the same time, Postbank’s extremely sound Consolidated Financial Statements Insurance Association). Moreover, the segment’s administrative liquidity position, which is mainly the result of the large customer expenses include IT and other service expenses of €424 million deposit base, means that it can largely avoid refinancing on the (previous year: €456 million), some of which are charged on to capital markets. In combination, the two factors enable Postbank to the operating segments and credited to other income in the operate with a higher leverage ratio than other banks. Others segment. Loans and advances to customers Consequently, net other income and expenses amounted to €577 The portfolio of loans and advances to customers, which also includes million compared with €662 million in the previous year. securitized assets such as promissory note loans, grew by 5.4 % Other Information during the course of 2009 to €111.0 billion. Private mortgage lending saw a slight year-on-year increase of €0.8 billion to €70.2 billion.

55 Fiscal Year I Group Management Report I Report on Post-Balance Sheet Date Events I Risk Report

This includes an increased reduction of the mortgage lending port Equity folios purchased during the past. In contrast, internally generated As of December 31, 2009, recognized capital had grown to €5,251 mortgage lending rose by 4.8 % to €65.8 billion. We were also able million compared with €4,952 million at the end of 2008. The factors to expand our installment loan business by €0.6 billion or 20 % to contributing to this improvement were the full retention of the con €3.6 billion, while at the same time ensuring strict compliance with solidated net profit, specifically the revaluation reserve contained our risk criteria. Corporate Banking business was a further contribut therein which had improved by €222 million to €– 502 million as a result ing factor to the growth in the loans and advances portfolio. During of a slight recovery in the capital markets since the end of 2008. 2009, we were able to play a significant role in supplying lending to corporate customers, filling gaps left by other banks. The Tier 1 capital ratio in accordance with Basel II was 7.6 % as of December 31, 2009, compared with 7.2 % based on the restated Money and capital market investments figures at year-end 2008. The improved balance sheet structure was also reflected in Postbank’s money and capital market investments comprising investment secu Overall, the action taken by Postbank during the course of the financial rities, trading assets, and loans and advances to other banks. As of market crisis to strengthen its capital position and improve its risk December 31, 2009, we had achieved a considerable reduction in these profile has played a key role in increasing and stabilizing the Tier 1 items year-on-year by 9.3% to €107.3 billion. capital ratio. Despite the sustained volatility in economic conditions, the Bank has been able to increase the ratio by 2.1 percentage points Trading assets had increased by 23.5 % to €20.5 billion. This was due compared with the low following the escalation of the financial market in particular to an increase in the positive fair values of trading book crisis in September 2008. derivatives, which rose in value owing to the significantly lower inter est rates in 2009 as against the end of 2008. There was a decline of The Bank is planning to introduce even more sophisticated risk measure €2.2 billion compared with September 30, 2009. ment models to further strengthen its capitalization. Moreover, Postbank intends to fully utilize the profits generated in fiscal years Loans and advances to other banks were reduced very substantially 2010 to 2012 for reinforcing its equity base. In this way, Postbank compared with the end of 2008, by 22.5 % to €14.5 billion. intends to gradually increase its Tier 1 capital ratio – as currently defined – to around 10 % by the end of 2012. In line with our strategy, investment securities also decreased signifi cantly by 12.9 % to €72.4 billion compared with December 31, 2008. Investment securities include an appreciable portfolio of highly liquid I Report on Post-Balance Sheet Date Events securities that we hold as liquidity reserve. There were no events subject to reporting requirements from Amounts due to customers December 31, 2009 until the adoption of the consolidated financial Amounts due to customers grew markedly by 12.3 % to €132.0 billion. statements by the Management Board on February 23, 2010. The principal reason was the savings business, which was very suc cessful in 2009. Savings deposits rose to €49.1 billion, €14.0 billion more than at the end of 2008 and €1.8 billion more than the figure as of September 30, 2009. Home savings deposits, which are of a very long-term nature, remained almost unchanged at €16.3 billion (previous year: €16.2 billion).

Money and capital market liabilities Money and capital market liabilities comprising deposits from other banks, debt securities in issue and trading liabilities fell by 18.3 % to €78.5 billion in line with the change in corresponding assets.

The Bank’s sound refinancing situation resulting from its strong deposit business on the one hand and the asset-side reduction of investment securities on the other enabled a significant reduction in deposits from other banks, which fell by 37.4 % to €39.3 billion. As a consequence of our successful Pfandbrief issues in 2009, there was an increase of 2.5 % in debt securities in issue to €16.7 billion. These liabilities are an important component in the Bank’s sound funding position.

As already described under trading assets, the growth of 31.8 % in trading liabilities to €22.4 billion was largely attributable to changes in market interest rates in 2009.

56 Fiscal Year I Group Management Report I Report on Post-Balance Sheet Date Events I Risk Report

I Risk Report The following sections describe in detail the Deutsche Postbank Group’s risk position and risk management, and the respective meas Summary overview of risk exposure ures taken by the Company. Following the turbulence of 2008, the crisis in the financial markets spread to the real economy in 2009. Even though central bank inter No risks that could impair the Postbank Group’s development or vention and a return of confidence resulted in a considerable even jeopardize its continued existence as a going concern have improvement in bank liquidity, there was a significant deterioration been identified among the risk types described below. in the creditworthiness of many borrowers. Spread markets and risk For our Shareholders premiums substantially improved in the second half-year accompa Organization of risk management An unsere Investoren nied by rallying stock markets. In contrast, even though the sharp Taking risks in order to generate earnings is a core function of the downswing in the world economy came to an end, economic growth Postbank Group’s business activities. To this end, the Postbank from the very low levels in Germany and the prime western countries Group has a risk management organization that serves as the basis was moderate. Postbank’s reaction to this market environment was for risk- and earnings-oriented overall bank management by identify prudent and the level of exposures was not increased in order to avoid ing all key risks and risk drivers and measuring and evaluating these vulnerability to setbacks on the capital markets. In present value independently. The risk management system aims to accept normal terms, the Bank was able to take profits on narrowing spreads. In net banking risk within a defined framework strictly reflecting the Bank’s interest income, the adverse effect of very low interest rates on cus risk-bearing capacity, so as to leverage the resulting opportunities tomer business margins was held in check by the favorable impact of for generating business. Our Business Divisions low interest rates on funding. Each of these two risks can bring either Unsere Geschäftsfelder significant potential opportunities or losses in present value terms. Risk management for the Group is primarily the responsibility of head office and controlled decentralized units. Unless otherwise In 2009, as in the previous year, the income statement was to a high noted, all items in the Risk Report specifically relate to these Group extent dominated by risks which materialized in the SCP (Structured functions. Compliance with regulatory requirements relating to sub Credit Products) portfolio, albeit less than in 2008. As expected, loan sidiaries is always assured. losses were heavier than in past years. Retail business, again as expected, was robust, whereas corporate loans, above all commercial Responsibilities and risk strategy real estate finance in foreign markets and to a certain extent in The Group Management Board is responsible for the Bank’s risk pro Our Responsibility Our Responsibility Germany, were significantly affected by restructurings, rescues and file and risk strategy, its risk-bearing capacity concept, the appropriate 50 defaults (see the section entitled “Income Statement” in the chapter organization of risk management, for monitoring the risk content of “Group Management Report” for further information). Postbank all transactions, and for risk control. The Management Board regul expects additional adverse impacts on the income statement for arly informs the Supervisory Board of the Postbank Group’s risk and 2010, albeit at levels below 2009. capital profile.

Postbank’s liquidity continues to be solid as a result of its relatively As required by MaRisk (Minimum Requirements for Risk Manage stable refinancing base consisting of customer deposits. ment), the Group’s risk strategy is consistent with business policies and takes into account all significant areas of business and types Building on the experience it has gained during the course of the crisis, of risk. In addition to an overarching risk strategy, Postbank’s the Postbank Group critically appraised the structures, instruments Management Board has resolved specific subrisk strategies for mar Group Management Report and processes for risk management and control for the relevant types ket, credit, liquidity, business, and operational risks. All strategies of risk in 2009. Methods and processes are consistent with current apply throughout the Group; the risk strategies adopted by individual statutory and regulatory requirements. Postbank has already closely Group units (e.g., BHW) are consistent with the Group risk strategy. analyzed the planned introduction of more stringent regulatory con trols. The dialogue with bank supervisory authorities was again intense The nature and extent of the risks taken, as well as the strategy for in 2009. It included discussions regarding the introduction of managing such risks, depend on the strategies defined by the busi advanced models for determining capital requirements and the manage ness divisions in line with the Postbank Group’s risk appetite. They ment of interest rate risk. The German Financial Reporting Enforce are documented within the scope of those risk strategies that are ment Panel’s (Deutsche Prüfstelle für Rechnungslegung e.V.) activities based on the business strategies defined by the individual divisions. included an on-site audit in early 2010 of all impaired individual Postbank’s areas of activity comprise the Retail Banking, Corporate

exposures (see Note 6). Improvement potentials in risk management Banking, Transaction Banking, and Financial Markets divisions. Consolidated Financial Statements 112 processes as determined by internal and external audits were promptly Postbank will introduce more stringent risk allocation procedures in addressed and corrective action taken which, together with new 2010, for example by introducing a Bank Risk Committee (see the regulatory measures, will also mark 2010. following section).

Postbank will also introduce ongoing improvements in risk manage ment through investment in IT infrastructure, more intensive training for the implementation of new procedures and a sharper focus on the risk/return ratio thus creating an environment for advanced methods of Other Information risk measurement. Further details are given in the sections below.

57 The Internal Audit unit is a key element of the Postbank Group’s The Chief Risk Officer is responsible throughout the Group for risk business and process-independent monitoring system. In terms of monitoring functions. He reports regularly to the Group Management the Bank’s organizational structure, it is assigned to the Chairman Board and the Supervisory Board on the Group’s overall risk position. of the Management Board and reports independently to the Group In terms of the organizational structure, the CRO is responsible for Management Board. the Risk Management, Risk Controlling, and Lending Policy depart ments. Since August 1, 2009, the CRO and the departments men Risk Committees tioned have been assigned to the Group Management board depart The following graphic illustrates the composition of the Committees ment. The CRO is a voting member of the Market Risk, Credit Risk, and their areas of responsibility. and Operational Risk Committees.

The Credit Risk Committee is responsible for the strategic manage The Risk Management unit is continuing to expand overall bank risk ment of counterparty credit risk, while the Market Risk Committee management and its integration with the Finance division’s bank is responsible for the strategic management of market and liquidity management activities. The goal is to optimize economic capital and risk. This includes a more detailed breakdown of the global limit risk allocation for the entire Bank based on the reports and data made available by the Group Management Board in each case. provided by the Risk Controlling, Controlling and Reporting units. The Operational Risk Committee defines the operational risk strategy This entailed the development of management tools in 2009 for the and decides on how the risk capital for operational risk is to be more stringent risk/return controls to be implemented in 2010. Other allocated to the business divisions. In addition, it lays down the important activities included analyses of and recommendations on framework for managing operational risk and defines the minimum processes and responsibilities relating to market risk management, requirements to be met by all Group units. the expanded use of Bank-wide stress testing and the introduction of the Bank Risk Committee. The responsibility of the Risk Management At the beginning of 2010, the Management Board approved the unit, which is still in development, is to derive appropriate measures establishment of a Bank Risk Committee, which will assist the with respect to planning and the management of business divisions Management Board in matters regarding Group-wide risk manage based on an analysis of Postbank’s risk profile. ment particularly with respect to the determination of risk appetite, risk allocation and the related income targets. Risk Controlling is the independent, Group-wide risk monitoring unit for all risk types. Risk Controlling is responsible for methods and Centralized risk monitoring and management models used for risk identification, measurement, aggregation, and One of our core tasks for 2009 was assuring the consistency of pro limitation. In addition, Risk Controlling is responsible for the design cedures with the CRO (Chief Risk Officer) structure established in the and regular preparation of the Postbank Group’s risk-bearing previous year within the Bank’s risk processes. It was for this reason capacity report. In cooperation with the Risk Controlling units at the that new staff was employed and the organization further developed. BHW Bausparkasse AG, Deutsche Postbank International S.A. and

Composition and tasks of the Risk Committees

Credit Risk Committee Market Risk Committee Operational Risk Committee

I Resources/Lending I Financial Markets I IT/Operations I Financial Markets I Finance I Resources/Lending I Retail I Resources/Lending I Branch Sales Managers Management

Members of the

Board / Executive I IT/Operations I Chief Risk Officer I Chief Risk Officer I Chief Risk Officer

I At least quarterly I At least monthly I Half-yearly Frequency of meetings I Allocate credit I Allocate market I Define minimum risk limits and liquidity requirements risk limits for Group units I Define limit system I Manage strategic I Define operational focus of the risk parameters Tasks I Resolve amendments banking book to risk classification I Allocate risk capital procedures I Discuss the Bank‘s amounts to the business earnings and risk divisions I Define standard positions risk costs

58 Fiscal Year I Group Management Report I Risk Report

PB Capital Corp. subsidiaries, as well as Postbank’s London branch, As part of credit risk monitoring, we have supplemented and ex- the department is responsible for risk control on an operational level panded processes, reporting lines and escalation mechanisms that and for risk reporting at Group level. enable monitoring of counterparty and issuer risk and categoriza tion of exposure by the various sectors, customer groups and individual The Lending Policy department lays down the credit framework for borrowers. In this connection, a project has been launched for the the retail and mortgage lending businesses as well as the Postbank more intensive monitoring and limiting of risk concentrations in the Group’s lending guidelines for Corporate Banking and Financial Markets. lending business through active credit portfolio management (see the 60 MaRisk and the requirements of the Solvabilitätsverordnung (SolvV – section entitled “Overarching risk management”) and for the imple For our Shareholders German Solvency Regulation) are authoritative in this context, in mentation of new MaRisk requirements. In the areas of market risk An unsere Investoren addition to the internal management objectives. and liquidity risk, concentration risk is identified, monitored, and managed primarily through stress tests and sensitivity analyses. It is intended to enhance the structure of the CRO units in 2010 and to align them even more closely with the risk types and overarching Further progress was made in 2009 particularly as regards the program risk management functions. The goal is to improve the convergence to introduce advanced risk models for market, credit and opera of process definitions and monitoring functions across the various tional risks. The aim of the program is to increase convergence between risk types. internal risk management and regulatory capital requirements, as well as to optimize the risk management systems and processes. Risk management Following regulatory approval, it is planned to also use the risk Our Business Divisions Within the Group, responsibility for risk management in connection models for all the above-mentioned risk types for the determination Unsere Geschäftsfelder with position-taking activities at an operational level is spread of regulatory capital in accordance with the SolvV. across a number of units, chief among them Financial Markets, the Credit Management Domestic/International departments, the Retail The A-IRBA project (Advanced Internal Ratings-Based Approach for Banking credit functions and, at a local level, the subsidiaries BHW which in-house estimates of default-related losses are used) also Bausparkasse AG, Deutsche Postbank International S.A., PB Capital addressed, within the framework of developing and validating models, Corp., and PB Factoring GmbH, as well as the London branch. underlying credit procedures (especially early warning systems, intensive handling and collateral management) in fiscal year 2009. The Financial Markets division is responsible for the Group-wide Certain of the procedures have been changed and additional Our Responsibility Our Responsibility management of market and liquidity risk at the operational level. improvements will be introduced in 2010. To this end, it is broken down into the Treasury, Credit Treasury, Liquidity Management, and Capital Markets departments. The Treasury As part of the “Internal Market Risk Model” project, the value at risk department manages interest rate risk, equity risk, currency risk, measurement used for market risk switched, initially with regard to and spread risk arising from government bonds, covered bonds and the trading book, from the variance-covariance approach previously corporate financial bonds in the banking book. The Credit Treasury used to a Monte Carlo simulation during the year under review. This department is responsible for performing active portfolio manage is designed to ensure more adequate inclusion of option risks, among ment to manage the Postbank Group’s other credit spread risk. The other things. In addition, the foundations were laid for greater differ Liquidity Management department is responsible for the central entiation of risk management according to risk types. Moreover, we management of liquidity risk, focusing on controlling liquidity maturity largely implemented a new market data delivery system aimed at further transformation and on ensuring continuous solvency in the Group. increasing the uniformity and quality of the market data used through Group Management Report With the exception of the interest rate trading book, responsibility for out the Group, which will become operational in 2010. which has been assigned to the Treasury department, all market risks in the trading book are managed by the units within the Capital In fiscal year 2009, Postbank enhanced its internal operational risk Markets department. reporting system to include quantitative elements such as the utiliza tion of the VaR (value at risk) limits assigned to the business The risk factors for new products and product modifications are sys divisions, as well as additional information on, for example, AMA- tematically identified in line with the MaRisk using a New Products/ related (AMA – Advanced Measurement Approach) risk indicators New Markets (NPNM) process and documented in a product database. and the results of scenario analyses. The AMA model is already in The resulting risks are included in the Postbank Group’s risk measure use and it is intended to apply for approval to the Bundesanstalt für ment and monitoring system. Finanzdienstleistungsaufsicht (BaFin – German Federal Financial

Supervisory Authority) in 2010. Consolidated Financial Statements Further developments in risk management In addition to the enhancement and consolidation of the CRO struc In the first half of 2009, Postbank refined the Group’s risk-bearing ture, other major organizational measures were taken during the capacity concept, concentrating in particular on the calculation of the year under review. Particularly in view of the financial market crisis, risk cover amount, as well as adding a concept for ensuring a defined the methods, systems, and processes discussed in this Annual Report, Tier 1 ratio. The details of the concept are given in the sections “Risk- and the reporting system that builds on them, are subject to continuous bearing capacity” and “Risk capital” in the chapter “Overarching risk 60 review and improvement in order to meet market, business and management”. regulatory requirements. Other Information

59 Risk types The Postbank Group considers its risk-bearing capacity as adequate The Postbank Group distinguishes between the following risk types: to the extent that the risk cover amount exceeds allocated risk capital I Market risk and the current level of overall risk (VaR). Potential financial losses triggered by changes in market prices (e.g., equity and commodity prices, foreign exchange rates) or changes Risk potential at a confidence level of 99.93 % is used for the protec in parameters that determine market prices (e.g., interest rates, tion of prior-ranking investors. The determination of the risk cover spreads and volatility). amount for investor protection is based on the consolidated balance sheet under IFRSs. The risk cover amount available for covering all I Credit risk risks consists of the Bank’s capital in accordance with IFRSs less Potential losses that may be caused by a deterioration in the credit- goodwill, its subordinated debt in accordance with IFRSs and parts worthiness of, or default by, a counterparty (e.g., as a result of of the other reserves and liabilities associated with financial instru insolvency). ments including customer transactions, less net cost. Other reserves I Liquidity risk include additional reserves that are not reported on the face and in Illiquidity risk is the risk of being unable to meet current or future the notes to IFRS-compliant financial statements. These are prorated payment obligations in the full amount due or as they fall due. checking and savings-related reserves as well as those of the BHW Liquidity maturity transformation (LMT) risk is the risk of increased Bausparkasse AG home savings collective as determined by replica refinancing costs as a result of closing gaps caused by changes in tion models. the Bank’s refinancing curve. I Operational risk When calculating the risk cover amount, additional discounts and The likelihood of losses that could be incurred as a result of limit buffers are used to account for estimating uncertainties. inadequate or failed internal processes and systems, people, or external events. This also includes legal risk. In 2009, the methods, systems and processes associated with the I Investment risk risk-bearing capacity concept were reviewed in detail in light of the Potential losses due to fluctuations in the fair value of equity lessons learned from the financial market crisis, among other things, investments, to the extent that these are not already included in and certain subareas were revised. These included, for example with other types of risk. respect to stress tests, the eligibility for inclusion of the various com ponents of the risk cover amount, and, with respect to risk-bearing I Real estate risk capacity, compliance with the minimum Tier 1 ratio. The risk-bearing The risk of loss of rental income, writedowns to the going concern capacity concept is continuously reviewed and, if necessary, amended value, and losses on sales relating to properties owned by the as and when new information comes to hand. Postbank Group.

I Collective risk The largely revised concept of risk-bearing capacity for the determi Potential adverse effect of a divergence in the behavior of home nation of defined Tier 1 ratio (going concern) entails a calculation of savings customers from expectations. Collective risk arises in con- the difference between the regulatory capital and the minimum Tier nection with the specific business risks relating to the home savings 1 capital that is required according to the Postbank view. The result business of BHW Bausparkasse AG. ant free Tier 1 capital and the planned income for the next three/ I Business risk twelve months are compared with the potential losses, at the 90 % Risk of a decline in earnings due to unexpected changes in busi- confidence level, recognized in profit or loss and directly in equity ness volumes and/or margins and corresponding costs. This con- arising from risks assumed over the same period, so as to ensure cept also includes model risk, which arises from modeling customer that the minimum Tier 1 ratio required to back the risk exposures products with undetermined capital and/or interest rate commit- is complied with at all times throughout the period under review. ments (primarily savings and checking account products), as well When predetermined amounts are reached (“red lights”) an escalation as strategic and reputational risk. to the Management Board is triggered.

Overarching risk management The key action performed in this area during the financial market Risk-bearing capacity crisis was to implement a recession scenario as a stress test for The Bank‘s risk-bearing capacity is monitored from two different examining the risk-bearing capacity; in this, all key risk types perspectives in parallel. It aims on the one hand to protect prior-rank to which Postbank is operationally exposed (credit, market and ing investors in a liquidation scenario (concept of investor protection) operational risks) were subjected to defined stress tests in order to and on the other to ensure a defined Tier 1 ratio in accordance with guarantee an overall risk assessment. the concept of a going-concern. The investor protection concept serves as the basis for limiting market, credit, and operational risks. The continuing development of the integrated stress tests for the Together with the concept of a defined Tier 1 ratio, the risk-bearing Bank as a whole is an ongoing, dynamic process that is performed concept provides management with input parameters for managing in keeping with changes in market trends and in Postbank’s risk economic and regulatory capital. profile. In addition to the stress tests of all risk types for the Bank as a whole, risk type-specific sensitivity analyses and stress tests are The Group Management Board specifies its risk appetite by defining also performed. a probability for unexpected losses and an upper limit for losses (risk tolerance).

60 Fiscal Year I Group Management Report I Risk Report

Risk capital The percentage allocation of the Postbank Group’s “investor protection” In order to ensure Postbank’s long-term risk-bearing capacity, the risk cover amount by risk type after factoring in correlation effects is Postbank Group’s Management Board only allocates a portion of the as follows for fiscal year 2009 (calculated as of December 31, 2009): risk cover amount (as calculated in accordance with the concept of investor protection) for risk taking, in line with its risk tolerance. Breakdown of the Postbank Group‘s risk cover amount by risk type This amount is known as risk capital and represents a limit for the (authorized risk capital) Postbank Group’s overall risk. Risk capital is determined and allocated to the individual risk types on at least a quarterly basis by the Group For our Shareholders An unsere Investoren Management Board. The Risk Committees allocate the risk capital 47 %, 20 %, in more detail. Operating limits are derived with reference to risk unallocated- market capital allocated to credit, market and operational risks. risk cover- risk amount

Other risks are handled by making deductions from capital. Liquidity risk is not explicitly included in the risk-bearing capacity and, as a 14 %, credit risk result, is not backed by economic risk capital. Postbank pursues 1 %, active liquidity management and control to prevent the risk of illiquidity. operational The Postbank Group has adequate sources of liquidity as well as a 11 %, risk collateral portfolio consisting of ECB-eligible securities for potential business- 1 %, risk Our Business Divisions stress situations. The risk of increased refinancing costs caused by investment Unsere Geschäftsfelder 6 %, and real- transforming maturities (liquidity maturity transformation risk) is, at collective risk estate risks the moment, implicitly covered by risk capital partially allocated to business risk and partially to market risk. To further improve manage ment of this risk type, it is planned to implement a separate limit for The risk capital allocated to credit risk was increased by €1 billion in liquidity maturity transformation risk in 2010. 2009, while the risk capital allocated to market risk was reduced slightly in the second quarter of 2009. The absolute amount of Since simply adding up the risk capital requirements for the individual “investor protection” risk cover and an allocation of the absolute types of risk would lead to the overall risk being overestimated, amount of risk capital by risk type at December 31, 2009 and the 147 Our Responsibility correlations between the different types of risk are taken into account previous year are given in Note 50. as part of risk aggregation. Experience has shown that there is a high correlation of market, credit, and collective risks. Business risk, real Risk cover utilization measured in terms of the allocated risk capital estate risk, and investment risk generally exhibit medium to high amounted to 53 % as of the reporting date after adjustment for losses correlations with the other risk factors. Only in the case of operational reducing the risk cover amount. This represents a slight improvement risk do we assume a low correlation to all other risk types. in the risk cover amount of 6 percentage points, both as against the H1 report and compared with December 31, 2008 (based on the original Risk capital allocation takes both potential fluctuations in economic concept). The following graphic depicts the development of authorized capital and stress scenarios across all risk classes into account. The risk cover capital compared to total risk cover amount. unexpected loss is quantified in order to calculate the utilization of the economic risk capital. The Postbank Group uses uniform param Development of the relation of authorized risk capital Group Management Report eters to measure individual risks that have been classified as material. to risk cover amount These parameters are oriented on the value at risk (VaR) approach, in % i.e., on the loss (less the expected gain/loss) that will not be exceed 100 ed for a 99.93 % level of probability within the given period (holding 90 period: usually one year; market risk: 90 days). 80 70 60 50 40 30 20 Consolidated Financial Statements 10 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 59 % 57 % 59 % 56 % 53 % Relation of authorized risk capital to risk cover amount

Other Information

61 Risk limitation The VaR (confidence level: 99.93 %) for operational risk at the level Within the Postbank Group, risk exposures are limited for the risk of the Bank as a whole, which was calculated on the basis of types included in the risk-bearing capacity primarily through the the internal quantification model, amounted to €490 million as of total risk capital allocated and, for the specific risk types, on the December 31, 2009. Utilization of the relevant limit amounted to basis of derived VaR limits. Depending on the risk type concerned, 87 %. The risk-bearing capacity of the Postbank Group was therefore these are supplemented by product, volume, and sensitivity limits assured at all times. The following graphic depicts limit utilization in order to limit the risk concentration of individual risk types for operationally managed risks over time: above and beyond the risk exposures themselves. Potential fluc tuations in economic capital and sensitivity analyses are taken Development of the limit utilization for operationally managed risk types into account when allocating limits and risk capital. in % 100 Operational limits are established for the market and credit risks 90 backed by risk capital and directly manageable in the day-to-day 80 business. Market risk is managed by allocating limits for the relevant 70 portfolios. For loans to banks, corporates, and countries (central and 60 regional governments and local authorities), credit risk is primarily 50 managed by allocating limits at portfolio level and through definition of 40 30 a target portfolio. The volume of retail business is controlled through 20 target vs. actual comparisons. 10 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Postbank amended its procedures for including operational risk in ■ Market the internal risk-bearing capacity concept at the start of the third risk 78 % 64 % 75 % 63 % 56 % quarter of 2009. The calculation of the capital requirements for ■ Credit risk 74 % 68 % 75 % 79 % 80 % operational risk is now based on a newly developed internal quanti ■ Opera- fication model. This model is used for calculating the utilization of tional the limit allocated to operational risk on a quarterly basis. As is risk 77 % 87 % normal practice for the banking sector, the loss distribution approach is used to determine operational value at risk at the 99.93 % con fidence level for which parameters required by section 284 of the As long as the limits assigned to the individual risk types are not Solvabilitätsverordnung (SolvV – German Solvency Regulation) are exceeded at Group level and the aggregated limits and deductible employed such as internal loss data, external loss data (obtained amounts are lower than the risk cover amount, risk-bearing capacity, from the ORX data consortium), scenario analyses and Postbank- based on the correlations assumed by the Bank, is assured. The regul specific business and control factors. atory capital requirements (regulatory capital adequacy in accordance with the Kreditwesengesetz (KWG – German Banking Act), the In the case of limit exceedances, action must be taken to mitigate risk; Solvabilitätsverordnung (SolvV – German Solvency Regulation), and alternatively, the limits for operationally limited risks can be increased – the Groß- und Millionenkreditverordnung (GroMiKV – German Large even during the course of the year – at the expense of other risk Exposures Regulation)) are additional conditions that must be strictly types or of the unallocated risk cover amount. The Postbank Group’s observed when managing economic risk capital. four business divisions have been allocated specific risk capital amounts, utilization of which is also monitored each quarter. OpRisk As of December 31, 2009, the risk/risk cover ratios to safeguard the Committee members receive quarterly reports on the utilization of defined Tier 1 ratio were 19 % (three month horizon) and 55 % defined VaR limits for the Bank as a whole and each business seg (twelve month horizon). The available risk cover amount is sufficient ment. When limits are exceeded by a business segment, the OpRisk for assuring the minimum Tier 1 ratio (green light). Committee decides on how to proceed whereas the Group Manage ment Board performs this function in the event of Bank-wide VaR Risks are only assumed within limits that are in line with the Bank‘s limits being exceeded. risk-bearing capacity. This is designed to ensure that risks that could jeopardize the Bank‘s existence are avoided. In light of the financial The other risk types are not managed using operating limits. Rather, market crisis, the risk situation remained tight in 2009. Whereas in the risk capital attributed to them is deducted from the risk cover the case of market risk the decline in market volatility seen in 2009 amount. The Risk Controlling unit regularly monitors the propriety of also tended to lead to lower limit utilization, credit risk (expected deductions. loss and unexpected loss) in particular is rising continuously due to the economic situation and the rating downgrades that have 56 % of the market risk limit was utilized as of the reporting date of occurred. December 31, 2009. Despite a downward trend in risk limit utiliza tion (December 31, 2008: 78 %), the volatility inputs used to calculate Risk concentrations the VaR, which increased sharply as a result of the financial market Postbank responded to the financial market crisis as well as to the crisis, continued in particular to put upwards pressure on the limit. revision of the MaRisk that took effect on August 14, 2009 by initiat Credit risk limit utilization was 80 % (December 31, 2008: 74%) after ing a project designed to enhance its management of risk concentra adjustment for losses reducing the unallocated risk cover amount. tions in the lending business, the ongoing implementation of which

62 Fiscal Year I Group Management Report I Risk Report

will also be one of the prime conceptual objectives for 2010. The on the borrower’s credit rating and, where applicable, collateral. In objective is systematic credit portfolio management that identifies addition, operational risk is also backed by equity. and reports risk concentrations at the borrower unit level as well as at sector level (sectors, regions, categories of collateral, etc.) and that As a result of its use of the IRB Approach, Postbank has exceeded limits such concentrations by a predetermined procedure that takes the relevant regulatory threshold since January 1, 2008. For 2009, risk-bearing capacity and risk/return considerations into account. the degree of coverage calculated in accordance with section 67 of the SolvV for the portfolios calculated on the basis of internal ratings Current risk concentrations at a confidence level of 99.93 % are par amounted to 92.0 % of the exposure amounts and 82.7 % of the risk- For our Shareholders ticularly perceptible with respect to “A” rated banks as well as in the weighted exposure amounts (calculated as of September 30, 2009). An unsere Investoren structured credit portfolio (SCPs). The degree of coverage represents the ratio of the total IRBA exposure amounts or IRBA risk-weighted exposure amounts to all exposure Concentrations of liquidity, market, and other risks are identified and amounts or risk-weighted exposure amounts required to be included monitored by using sensitivity analyses and stress tests. Limits take pursuant to section 67(4) of the SolvV. The portfolio, capital backing the form of volume or gap limits, which are monitored on an ongo for which is calculated using internal ratings, changed in fiscal year ing basis, while the risks are managed in the course of day-to-day 2009 insofar as foreign business partners from the public sector of management (e.g., via hedging). the European Economic Area have been calculated using the Credit Risk Standardized Approach (CRSA) since January 1, 2009 and the Due to its business model as a retail bank operating primarily in “insurers” portfolio has been included in the calculations based on Our Business Divisions Germany, Postbank is also subject to earnings risk, i.e. to the risk the Basic IRB Approach since July 1, 2009. Unsere Geschäftsfelder that actual retail business earnings will be lower than planned. The monitoring of this earnings risk is made with the assistance of the As of the reporting date of December 31, 2009, Postbank calculated Controlling department as part of the planning process and involves the regulatory capital requirements for the following portfolios monitoring risk concentration using sensitivity analyses, statistical (grouped by exposure class in accordance with the SolvV) on the techniques and taking other appropriate action. basis of internal ratings:

Group-wide risk reporting I Central governments: countries Postbank‘s risk reporting system addresses risk-bearing capacity and I Institutions: banks Our Responsibility Our Responsibility risk utilization. Risk-bearing capacity is assessed Group-wide on a I Corporates: domestic corporate customers, foreign corporate quarterly basis and presented in a separate report. Risk utilization for customers, domestic commercial lending, foreign commercial lend- the individual risk types is presented in a large number of regular, ing, purchased corporate loans, insurers specific reports. The reports include all relevant subsidiaries of I Retail business: Postbank mortgage loans, BHW mortgage loans, Deutsche Postbank AG, and are prepared on a daily, weekly, monthly, installment loans, overdraft facilities for self-employed individuals or quarterly basis, depending on the importance of the respective and business customers, purchased retail loans risk type. Group-wide reports are usually addressed to the Group I Equity claims, if not covered by the exception in section 338(4) Management Board and/or the responsible members of the Risk of the SolvV Committees, as well as the operating units. In addition, the Supervisory I Securitization positions Board receives summaries of these reports. Recipients are thus kept I Other non-credit obligation assets. informed of changes in relevant parameters in a timely manner. Group Management Report Risk Controlling is responsible for the methodology and content of In the central governments, institutions and corporates exposure risk reporting at Group level. classes, Postbank has used internal estimates of probabilities of default; in addition, the Bank has used internal estimates of expected loss In addition to regular management reports, rules have been estab rates and conversion factors for its retail business. lished for an ad hoc early warning reporting system that differentiates between different types of risk. Postbank uses the CRSA for the portfolios not calculated in accord ance with the IRB approaches. These primarily relate to the following: Regulatory requirements Capital requirements I Overdrafts and collection activities in the retail banking business Since the SolvV entered into force on January 1, 2007, Postbank has I Portfolios of the other subsidiaries in the Postbank Group calculated its capital on the basis of Basel II. In a letter dated I Business from discontinued operations Consolidated Financial Statements December 21, 2006, the Bundesanstalt für Finanzdienstleistungsaufsicht I Exposures to business partners from the public sector of the (BaFin – German Federal Financial Supervisory Authority) granted European Economic Area. Postbank approval to adopt the Basic IRB Approach for calculating capital requirements and the IRB Approach for calculating capital requirements with respect to its retail business; in a further letter dated December 11, 2007, this approval was extended to cover the calculation of additional portfolios using internal ratings systems. As a result, regulatory capital requirements for credit operations are Other Information now aligned more closely with economic risk. Accordingly, loans must now be backed by equity on a risk-weighted basis, i.e., depending

63 In the case of securitization positions, the IRB Approach or the CRSA Minimum Requirements for Risk Management (MaRisk) is applied on the basis of the underlying transactions. Capital back The Mindestanforderungen an das Risikomanagement (MaRisk – ing for securitization positions is generally calculated on the basis of Minimum Requirements for Risk Management), which took effect as the ratings-based approach using external ratings, or via the super of January 1, 2007, replace the previous Mindestanforderungen an visory formula approach. Postbank uses a derived credit assessment das Kreditgeschäft (MaK – Minimum Requirements for Credit for the PB Domicile 2006-1 securitization, which it originated. Transactions), the Mindestanforderungen an das Betreiben von Securitization positions, for which a risk weight of 1,250 % is calcu Handelsgeschäften (MaH – Minimum Requirements for the Trading lated, are deducted from capital. Activities of Credit Institutions), and the Mindestanforderungen an die Ausgestaltung der Internen Revision (MaIR – Minimum Standards Postbank calculates the capital backing for equity exposures allocated for Auditing Departments of Credit Institutions). The MaRisk extends to the banking book that are not required to be consolidated or these regulations to include in particular the issues of interest rate deducted from own funds for regulatory purposes on a portfolio-spe risk in the banking book, as well as liquidity risk and operational risk. cific basis, using internally assessed default probabilities. Strategic The primary purpose of MaRisk in terms of its content is to establish equity exposures held prior to January 1, 2008 have been temporarily adequate management and control processes based on a bank’s excluded from IRBA capital backing. Risk weighting of the other overall risk profile. In addition, MaRisk resulted in the regulatory ful equity exposures and of the non-credit assets is performed using fillment of the qualitative Pillar II requirements in accordance with regulatory risk weights. Basel II.

In addition, Postbank is currently in the process of implementing the With effect from December 31, 2009, Postbank had already imple changeover to the Advanced IRB Approach for calculating the capital mented a large proportion of the additional requirements resulting backing for counterparty credit risk for the non-retail portfolios using from the revised version of the MaRisk published on August 14, 2009 internal estimates of expected loss rates. with respect to the integration of the supervisory bodies, the treat ment of risk concentrations, risk management at Group level, and the Postbank uses the regulatory standardized approach to calculate requirements to be met by the remuneration system. In the case of capital requirements for market risk. As part of its program to intro isolated requirements implementation will only be completed in the duce advanced risk models, Postbank is in addition preparing to deploy course of 2010. the internal market risk model used to measure and manage market risk to also determine the capital requirements for market risk in New regulatory requirements in the wake of the financial market crisis accordance with the SolvV. In 2009, the European Parliament and the European Commission resolved additions to the Capital Requirements Directive (CRD) that To date, Postbank has used the standardized approach for calculat are to be implemented at national level by the end of 2010. The rele ing capital requirements for operational risk. This is the basis for the vant draft amendments to the KWG, the SolvV, and the GroMiKV, planned implementation of an Advanced Measurement Approach among other things, were published by the German Federal Ministry (AMA). The goal is to apply for approval to the Bundesanstalt für of Finance on December 10, 2009. Postbank has already begun imple Finanzdienstleistungsaufsicht (BaFin) and Deutsche Bundesbank in menting the new capital adequacy and large exposure requirements. the first quarter of 2010, so as to be able to use the internal capital model for calculating regulatory capital requirements as well once On December 17, 2009, the Basel Committee published two consul approval has been granted. tation papers aimed at strengthening regulatory capital and liquidity regulations. From the end of 2012 onwards, these regulation will With regard to the disclosure requirements pursuant to sections 319 entail increased capital requirements, differentiated counterparty to 337 of the SolvV in conjunction with section 26a of the KWG, capital requirements, a leverage ratio, counter cyclical capital buffers, Postbank published its Pillar III Disclosures in accordance with Basel and minimum liquidity standards. In 2010, Postbank will take part II on its website on March 31, 2009 and August 31, 2009. The in the planned consultations and the impact assessment. Disclosures as of December 31, 2009 will be made available on the website shortly after the publication of the annual financial state Monitoring and managing market risk ments. Definition of risk Market risk denotes the potential financial losses caused by changes Liquidity requirements in market prices (e.g., equity prices, foreign exchange rates, com Deutsche Postbank AG meets the regulatory liquidity requirements in modity prices) and parameters that determine market prices (e.g., accordance with section 11 of the KWG in conjunction with the interest rates, spreads and volatilities). The changes in value are Liquiditätsverordnung (LiqV – German Liquidity Regulation), which derived from daily marking to market, irrespective of the carrying entered into force on January 1, 2007. Deutsche Postbank AG cal amounts of assets and liabilities. culates its liquidity ratios on the basis of the regulatory Standardized Approach in accordance with sections 2 to 8 of the LiqV. The pro Organization and risk strategy cesses for Group-wide identification, measurement, monitoring, and The responsibility for performing centralized risk management tasks management of liquidity risk are based on the requirements formu at the Postbank Group lies with the Management Board. The lated in the “Principles for Sound Liquidity Risk Management and Management Board has delegated market risk management to the 79 Supervision” (see the chapter entitled “Liquidity risk” for further Market Risk Committee (MRC), which is monitored by the information). Supervisory Board.

64 Fiscal Year I Group Management Report I Risk Report

The Postbank Group has established clear rules with regard to In light of the financial market crisis, Postbank started actively reduc responsibility for market risk management. In general, Deutsche ing its market risk exposure in 2008; this cautious risk strategy was Postbank AG’s Financial Markets division manages market risk cen systematically maintained in the equities area in 2009. In the interest trally. BHW Bausparkasse AG, the foreign subsidiaries in New York rates area there was a greater focus on the assets side again. To reduce and Luxembourg, and the London branch manage their risks inde the Bank’s exposure to extreme capital market volatility, it is planned pendently using separately defined risk limits. To achieve this, the to cut its holdings of investment securities as of December 31, 2008, integration of the Market Risk Committees (MRCs) at the subsidiaries primarily as a result of instruments maturing, by up to 45 % by 2013. into the Group was increased in fiscal year 2009. The amount of the reduction in 2009 was approximately 13 %. For our Shareholders An unsere Investoren

Risk Controlling functions as a Group-wide, independent monitoring To account for the relative significance of market risk and the volatil unit. Risk Controlling is responsible for operational limit monitoring ity of market movements, Postbank has defined escalation mecha and reporting, in addition to the methods and models used for risk nisms for critical management parameters and for exogenous events. identification and measurement. These mechanisms make it possible to react promptly to situations in which limits are approached or exceeded, as well as to extreme market The Postbank Group has laid down the basis for dealing with market movements impacting Postbank. risk, among other things, in its overarching risk strategy. The risk capital made available for taking on market risk limits the scope of Interest rate risk management the market risk that can be taken on to a level that is reasonable and Interest rate risk – a significant component of market risk – is the Our Business Divisions desirable for Postbank from an earnings perspective. Unwanted mar term used to denote the changes in the fair value of interest-sensitive Unsere Geschäftsfelder ket risk is hedged or reduced where it makes economic sense to do financial instruments resulting from a change in market rates of inter so and where this is possible given the tight market conditions result est. Interest rate risks arise where there are differences in the ing from the financial market crisis. When market risk is intentionally amounts and interest rates of the interest-sensitive assets and liabili taken or retained, this is done with the goal of generating income. ties for individual maturity bands. Specific behavioral assumptions Postbank thus enters into interest rate, equity, currency, spread, com are made on the basis of past behavioral patterns in order to quantify modity, and volatility risks in its banking and trading books as an the interest rate risk for customer transactions involving significant additional source of income. implicit options. Particularly important in this connection are Deutsche Postbank AG’s variable interest customer deposits, for Our Responsibility Our Responsibility Risk management and control which the moving averages model is used, the exposures in BHW Postbank makes use of a combination of risk, earnings, and other Bausparkasse AG’s home savings collective, as well as the customer inputs to manage its market risk. Changes in the value of market risk loans business. Special modeling rules and deposit base definitions are derived from daily marking to market, independently of their supplement the monitoring and management concept. When measur measurement for financial accounting purposes. In the case of inactive ing interest rate risk, option models are used to account for material market segments, a special process has been instituted to regularly statutory and contractual early loan repayment rights, offers of new review whether the market data available still permits adequate valu loans and extensions to existing ones, and loan payment delinquencies. ations to be made. As a result, specific portfolios are marked to The option models and statistical modeling techniques used for this model. The management of market risk exposures from an earnings were extended and further enhanced in 2009. In the case of deposits perspective focuses both on specific periods and on the present value. without agreed maturities, investor behavior is modeled using the All market risk is measured using value at risk. Risks from potential internal models and procedures for managing and monitoring inter Group Management Report changes in spreads have been taken into account in risk measure est rate risk. In accordance with MaRisk, those elements of capital ment. Sensitivity indicators and maturity structures are other manage available to the Bank without time limit are excluded from the deter ment indicators used. mination of interest rate risk.

In addition, market risk exposures are subjected to regular scenario As a matter of principle, operational management of all market risk analyses and stress tests, which analyze the impact of unusual market is performed centrally by Postbank’s Financial Markets division. The movements both on the present values and on the income statement following chart presents the Postbank Group’s open interest rate and balance sheet items. Concentration risk is taken into account positions as of December 31, 2009 in the form of a basis point value separately when measuring market risk. This is done, for example, (bpv) graph. Positions with a negative value represent an asset-side during regular scenario analyses by quantifying the effects of expo interest rate risk, which means that there is a surplus of assets. In sure class-, rating-, or currency-specific stress tests. In addition, the same way, positive values indicate a surplus of liabilities. Consolidated Financial Statements sensitivity analyses that identify risk concentrations, among other things, Postbank’s overall interest rate position as of December 31, 2009 for all portfolios of the Postbank Group are performed in the course was aligned with assets. of daily monitoring of market risk. Instruments used in this context include gap analyses and credit spread sensitivity analyses by asset class and credit rating, and analyses of the Group’s exposure to equities and foreign currencies. Other Information

65 The Postbank Group‘s interest rate positions (bpv) as of December 31, 2009 of their presentation in the balance sheet, and transforms heteroge neous types of market risk into a single measure of risk, the VaR. bpv in €m The risk limits derived when the risk-bearing capacity is calculated 1.50 are scaled accordingly. 1.00 0.92 0.50 0.30 0.05 0.10 Limiting risk 0 In the Postbank Group, market risk is monitored using a system of risk – 0.50 – 0.37 – 0.37 – 0.56 limits based on the value at risk methodology. The aggregate limits – 1.00 are set by the Group Management Board and allocated by the Market – 1.22 – 1.16 – 1.22 – 1.50 –1.43 Risk Committee to the individual operating units as sublimits. These – 2.00 are dynamic outcome-based limits; any losses incurred reduce the limit, while gains replenish it, at a maximum, to the originally defined

2 years 3 years 4 years 5 years 6 years 7 years 8 years 9 years level. There were no limit exceedances at Group level in 2009. 10 years <=1 year >10 years End-of-day risk measurement and monitoring are used for the whole Maturity band Bank; additional intraday monitoring is carried out for the trading portfolios. The chart shows that the surplus of assets as of December 31, 2009 is primarily concentrated in the medium and long-term (>10 years) Backtesting maturity ranges. The surplus of liabilities in the 7, 8, and 10-year The methods used to compute VaR are regularly tested for reliability. band can be attributed essentially to the long-term positions in BHW The predictive accuracy of the calculated VaR is tested by comparing Bausparkasse AG’s home savings collective as determined by data it with the gains and losses arising from actual changes in fair value, derived from collective simulations. Interest sensitivity is mainly the but for the same portfolio (clean mark-to-model backtesting). result of euro exposures and, to a significantly smaller extent, of Evaluation uses the “traffic light” color code model published by the U.S. dollar exposures; interest sensitivities to other currencies are Bank for International Settlements (BIS). The Management Board is immaterial. Interest sensitivity, which had been reduced significantly informed of the backtesting results in the monthly reports. at the beginning of 2009, was clearly aligned with assets again in the course of the year due to the steepening yield curve. The changes The current “Internal Market Risk Model” project laid the foundation in 8 to 10 year maturities were primarily the result of an adjustment for discontinuing the use of current mark-to-model backtesting in to the model in the first quarter of 2009 for the quantification of the favor of a marking-to-market procedure which is planned to be imple interest rate risk to which the BHW Bausparkasse AG home savings mented in 2010. collective is exposed and the changed treatment of the components of capital made in mid-2009. The backtesting results at all portfolio levels eased and normalized significantly in the course of the year in comparison to 2008. The VaR In particular, the risk sensitivity of the AfS positions was again man premiums that were introduced temporarily in the fourth quarter of aged extremely closely in order to limit the additional potential 2008 in response to the dramatic increase in the market risk factors impact on the revaluation reserve and hence on the capital ratios. were abolished again in the first quarter of 2009, as the rapid rise in Interest rate risk analysis is an integral part of daily market risk volatility was successively reflected in VaR measurements. At the measurement and, as a result, also forms part of the VaR analyses 2009 year-end, backtesting (one-sided binomial test in accordance for market risk (trading book and banking book). with the Basel traffic light approach) produced results within the statistically expected ranges (“green” traffic light). This confirms the Monitoring market risk using value at risk fundamental appropriateness of the VaR methodology applied. The Postbank Group uses the value at risk concept to quantify and monitor the market risk it assumes. Value at risk (VaR) in the banking Stress testing book is calculated using the variance-covariance method. In October In addition to the VaR calculations, scenario analyses are performed 2009, a Monte Carlo process was adopted for VaR calculations for all at regular intervals to permit the separate analysis of extreme market trading book positions. Risk capital allocation is based on a historical movements. These analyses quantify the effects of extraordinary observation period of 250 trading days, a holding period of 90 trad events and extreme market conditions (worst-case scenarios) on the ing days, and a confidence level of 99.93 %. Operational manage Postbank Group’s balance sheet positions. The scenario analyses and ment, however, is based on a confidence level of 99 % and a holding stress tests are performed for all material risk factors in the interest period of 10 days (banking book) or 1 day (trading books). The risk rate, spreads, currency, and equity risk types. The assumptions factors taken into account in the VaR include yield curves, equity underlying the stress tests are validated on an ongoing basis. The prices, commodity prices, foreign exchange rates, and volatilities, stress parameters were completely revised in 2009 in light of the along with risks arising from changes in credit spreads. Correlation financial market crisis in order to account for the market volatility effects between the risk factors are derived from historical data. observed and are currently being reviewed to assure compliance with new MaRisk requirements. The effects of the scenarios are compared The VaR of a portfolio thus describes the potential decline in fair value with the limits allocated for each risk. The Group Management that will not be exceeded in that portfolio in a period of ten trading Board, the members of the Market Risk Committee, and the Super days with a probability of 99 %. The calculation is applied consistently visory Board are kept regularly informed of the results of the scenario to all portfolios in the trading book and the banking book regardless analyses. The scenario analyses performed in the year under review

66 Fiscal Year I Group Management Report I Risk Report

indicated that the Postbank Group’s risk-bearing capacity would have The following chart illustrates the development of value at risk for been assured even if the tense market situation continued to worsen. our trading book over the course of fiscal year 2009: The greatest risks that emerge on application of Bundesbank stress tests, which are considered to be moderate, were those in connection Value at risk trading book 2009 with interest rates and spreads. The Group suffered a present value loss of €432 million (as of December 31, 2009) in the spread scenario VaR in €m

(rating-related widening of spreads ranging from +10 bp for AAA 30 ratings to +200 bp for CCC ratings). The most unfavorable of the interest 25 For our Shareholders rate scenarios analyzed (upwards shift with a peak in medium term An unsere Investoren 20 maturities) resulted in a present value loss of €687 million. 15 10 Appropriate market terms In addition to monitoring market risk, the Postbank Group also checks 5 all trades when they are entered into to ensure that market prices 0 have been applied (market conformity verification). This is supervised

Jan./09 Jun./09 Jul./09 Oct./09 by internal units that are independent of the trading functions. Dec./08 Feb./09Mar./09 Apr./09 May/09 Aug./09 Sep./09 Nov./09Dec./09

Risk indicators In the course of 2009, the pronounced volatility in the trading book Our Business Divisions The following value at risk figures for the trading book were calculated was used flexibly during positioning on the interest rate and equities Unsere Geschäftsfelder for the Postbank Group for the period from January 1 to December 31, markets. The VaR in the trading book was at a comparable level to 2009 and January 1 to December 31, 2008 (confidence level of 99 %, 2008, and was moderate overall. holding period of 10 days): The value at risk for the banking book (confidence level 99 %, hold Value at risk trading book 2009 2008 ing period 10 days), which accounts for by far the largest portion of €m €m market risk, amounted to €365.7 million as of December 31, 2009 (for comparative purposes: December 31, 2008: €532.0 million).

VaR at year-end 10.3 13.8 Our Responsibility Minimum VaR 4.4 7.7 Value at risk banking book 2009 2008 €m €m Maximum VaR 23.2 23.9 Average VaR 13.1 12.9 VaR at year-end 365.7 532.0 In line with the business strategy of the Postbank Group, the level of Minimum VaR 362.5 194.3 market risk is largely determined by the interest rate risk (including Maximum VaR 565.0 533.1 spread risk) in the banking book. In addition, equity price risk and Average VaR 458.8 281.2 volatility risk is assumed in order to diversify risk in the banking book and generate short-term price gains in the trading book. Currency The calculation incorporates all market risk-bearing positions in the risk, which is primarily incurred as a result of the business activities banking book. of Deutsche Postbank AG’s foreign subsidiaries, is of lesser signifi Group Management Report cance. The present value risks in connection with foreign currency positions are inputs for daily market risk measurements and reports. The focus of their management is, in addition to present value con siderations, the minimization of risks impacting the income state ment as a result of foreign currency positions. Consolidated Financial Statements Other Information

67 Monitoring and managing credit risk Value at risk banking book 2009 Definition of risk VaR in €m The Postbank Group defines credit risk (or counterparty credit risk) as risks arising from potential loss that may be caused by changes in 600 the creditworthiness of, or a default by, a counterparty (e.g., as a 500 result of insolvency). Four types of credit risk are distinguished: 400 300 I Credit or default risk 200 The risk of possible losses arising from the inability of a counter- 100 party to discharge its payment obligations, or from a deterioration 0 in its credit rating.

I Settlement risk Jul./09 Dec./08 Jan./09 Feb./09Mar./09 Apr./09 May/09 Jun./09 Aug./09 Sep./09 Oct./09 Dec./09 Nov./09 The risk of possible losses during the settlement or netting of transactions. Settlement risk always exists where cash, securities, VaR in Postbank’s banking book is trending downwards again fol or other traded assets are not exchanged at the same time. lowing the clear rise experienced in the prior year as a result of the crisis. However, the risk measurements continue to reflect the subs I Counterparty risk tantial rise in the risk inputs used that occurred in the course of The risk of possible losses arising from default by a counterparty the financial market crisis. Since a one-year history is used for risk and hence the risk to unrealized gains on executory contracts. parameters, these inputs are now entirely determined by observed The risk involved is replacement risk. values that reflect the renewed sharp rise in volatility in the period following the collapse of Lehman in September 2008. I Country risk The risk of possible losses arising from political or social upheaval, Risk reporting nationalization and expropriation, a government’s non-recognition The Postbank Group uses a variety of regular reporting instruments of foreign debts, currency controls, and devaluation or depreciation that provide detailed information on the market risk assumed: of a national currency (transfer risk).

I The daily report serves to inform the Group Management Board Organization and risk strategy and the position managers about the positions entered into, The Management Board has overall responsibility for risk management limit utilization, and the economic profit/loss of the positions throughout the Postbank Group. It has delegated the management before the start of each trading day. of credit risk to the Credit Risk Committee (CRC) whereas the Loan and Equity Investments Committee provides monitoring on behalf of I The weekly report is addressed to the position managers and the Supervisory Board. summarizes the significant changes in the market and in the positions. The daily and weekly reports are regularly discussed The Postbank Group has established clear rules with regard to with the position managers and provide the basis for opera- responsibility for credit risk management. The Credit Risk Committee tional management. (CRC) is responsible for strategic structural management at the level of the Postbank Group. Operational credit risk management is I The monthly report provides a comprehensive overview of the performed centrally by the Domestic Lending and Foreign Lending change in market risk within the reporting period and is units, and locally by the back office units at the subsidiaries. Risk addressed to the Group Management Board. In addition to cur- Controlling functions as a Group-wide, independent monitoring unit. rent results and risk indicators, this report also contains the Risk Controlling is responsible for operational limit monitoring and results of stress testing and backtesting, which are carried out reporting, in addition to the methods and models used for risk on a regular basis. Information is also provided on the interest identification, measurement, and management. The Lending Policy rate risk in the banking book in the event of a specified interest unit is responsible for the issuance of standards regarding the rate shock along with additional interest rate scenarios; the figures treatment of credit risk exposure and targets for risk management are broken down by portfolio and currency. at portfolio level.

I The monthly MRC report addressed to the Market Risk Committee The Postbank Group manages its counterparty credit risk on the basis presents risk indicators in an aggregated form (VaR, interest of the credit risk strategy approved annually by the Management Board. rate sensitivities, stress test results), and present value or periodi- The credit risk strategy contains targets for the risk profiles as well as cal results by management unit and indicates their impact on target returns for individual credit products. the income statement. The Postbank Group uses a target portfolio as a reference for the I The quarterly risk report to the Supervisory Board summarizes overall composition of its loan portfolio, which focuses on corporate the key risk indicators. It also presents the results of the sensitivity customers, banks, countries (central and regional governments and and stress test analyses. local authorities) and retail in addition to related risk concentrations. The target portfolio has been constructed to reflect a balanced risk/

68 Fiscal Year I Group Management Report I Risk Report

return profile and is used as the basis for structuring allocations to Regulation (SolvV), the Bank has decided to make significant invest rating classes, sectors and regions. The current portfolio of receivables ment in new quantitative credit risk controlling personnel. is compared quarterly with the target portfolio. In the case of cor porate finance, an individual profitability analysis is additionally In Retail Banking, loans are approved, decisions to extend them are performed on the basis of the return on equity, the ratio of the risk- made, and terms are defined using the results of statistical scoring adjusted net margin to the equity tied up. Due to its high degree of models and approval guidelines. The scoring models utilized at Postbank risk diversification, the retail business is not part of the target port make use of internal and external information about the borrower folio, but is managed instead using the expected net margin less the and employ statistical methods to individually estimate the probability For our Shareholders expected risk. of borrower default (PD). The loss given default (LGD) is calculated to An unsere Investoren estimate the recovery rates individually, taking any eligible collateral The management and monitoring of counterparty credit risk and into account, or globally, in the case of small-scale uncollateralized hence the implementation of the credit risk strategy are performed retail business. For retail checking products, Postbank uses an inter on the basis of individual risks on the one hand, and the entire port nal behavior scoring system that individually assesses default risk on folio on the other. the basis of historical account management data and additional external information. The credit conversion factor (CCF) is calculated Risk management and control to determine the proportion of outstandings under open credit lines at the time of default. Managing individual risks Our Business Divisions Credit approval procedures Rating models, which generally comprise a statistical core (statistical Unsere Geschäftsfelder The Postbank Group’s credit guidelines contain detailed targets for balance sheet rating or Monte Carlo simulations of expected cash all lending transactions. Credit approvals are subject to an established flows) and which incorporate qualitative and shorter-term information system of competencies, which act as a framework within which in the internal rating via a heuristic component, are used to make decision-making individuals or bodies are authorized to enter into loan decisions and define terms for customers and guarantors in the lending transactions. Responsibility for the approval of loans is areas of corporate customers, banks, and countries. dependent on the loan size and, for corporate customers and trans actions in the Financial Markets division, additionally on the credit All internal ratings and scorings are presented using a uniform master rating of the specific borrower or debtor. An important feature of the scale, which assigns each rating or scoring result to a rating class Our Responsibility Our Responsibility credit approval procedure is the separation between market (sales/ on the master scale, as well as the default probability determined for trading), back office divisions and risk management in accordance that class. Postbank uses the terminology of the Standard & Poor’s with the regulatory parameters (MaRisk). A permissible exception rating agency here. The rating and scoring methods are validated as according to banking regulatory law from the strict separation of part of Postbank’s annual model validation process and during ongo functions is the standardized credit approval process in business not ing monitoring. The model validation is based on standard core relevant for risk purposes, which Postbank defines as private residen analyses comprising the following aspects: stability of the model tial construction finance up to €1 million, other retail credit products formula/the estimated parameters and the distributions, as well as as well as loans for up to €750,000 in the Corporate Banking division, the accuracy of the rating model, and the predictive power of the to which simplified and standardized processes are applied. models. During the validation process, any changes in the loss history are taken into account by adjusting the inputs. Scoring and rating Group Management Report Postbank makes use of internal rating systems authorized for use of In addition, the allocation of the rating classes used in Postbank’s the IRB Approach under Basel II. In addition to meeting the methodo master scale to default probabilities and the results of the input logical and procedural/organizational requirements, these rating estimates (PD, LGD, CCF) are reviewed annually by the Risk Controlling systems have proven their suitability in relation to the classification Credit Risk unit. By including model validation in Postbank’s processes, of existing portfolios and new business. Regardless of the size and it is generally possible to derive business policy and model-specific type of the loan, individual rating or scoring is performed regularly measures directly from the results of the core analyses. Electronic during the credit approval process. records are maintained of all relevant input factors and rating results, enabling a continuous rating history to be kept for each customer The Risk Controlling Credit Risk units is responsible for designing, and transaction. implementing, and monitoring the functionality of the internal rating systems. The process of monitoring the rating systems includes In addition to supporting the loan decision process, among other Consolidated Financial Statements assessing their predictive quality and correct application, their cali things, these ratings and scores serve as a basis for calculating the bration and validation, and incorporating the results of the monitor “expected loss”, i.e., the loss that is to be expected as a statistical ing activities into the internal reporting system. All rating systems are average over a one-year period. They are factored indirectly into approved by Postbank’s Management Board, which receives regular margin calculations via the standard risk costs (see following section), information on their functionality as well as on the results of the rat along with other variables. ings performed as part of the management reporting process. The Bank’s credit risk management in 2010 will be focused on the ongo Risk/return key performance indicators ing development, continual validation and, where necessary, recalibra When calculating the loan losses expected in the Postbank Group, Other Information tion of the scoring and rating systems. In order to assure the advanced the average standard risk costs are factored into the advance calcula approach is fully and prospectively in compliance with the Solvency tion on an individual loan basis. This system allows all lending trans

69 actions to be evaluated during the advance calculation. The standard German Central Credit Committee), while the front office and back risk costs are priced in as a premium for the expected loss and are office divisions perform qualitative monitoring of the relevant sectors included in the profitability calculation in the form of a return on and real estate markets on an ongoing basis. In the case of loans equity (RoE) ratio for exposures to corporates. The profitability calcu and property values in excess of €3 million, valuations are always lation aims to ensure an end-to-end assessment of customer relation reviewed at the latest after three years by independent, qualified ships and is performed at product or portfolio level for retail customers, valuation specialists, or a new appraisal is performed by real and at an individual level for non-retail customers. estate experts.

Collateral management In order to improve collateral management, Postbank intends to Collateral management is an important and integral component of introduce a client collateral administration system throughout the the credit management process at Postbank. Strict standards have Group for which a preliminary study has been initiated. been established regarding the quality (e.g., the legal validity and enforceability) of the collateral accepted. As in the case of the under Credit monitoring and problem loan procedures lying transactions with counterparties, the value of the collateral is For non-standardized loans, credit risks are monitored by means of continuously monitored on the basis of uniform Group standards, not credit assessments carried out at least once annually and whenever only when the loan is granted but also during its term. Room for events occur that could affect the creditworthiness of a borrower. improvement was identified and appropriate action taken in 2009 The controls are carried out by the operational lending units in the particularly with respect to the ongoing and timely valuation of back office in accordance with banking regulatory requirements and, immovable collateral in highly volatile markets, uniform documenta in the case of trading transactions, by Risk Controlling in addition. tion and data input into a consolidated database. The Bank also intends to enhance its standardized processes for the acceptance and In the area of individual lending to corporate customers and mort management of other collateral in order to improve its position. gage lending in excess here of €500,000 per borrower or borrowing entity, Postbank has implemented a credit monitoring process in The decision in principle, on the approval and application of types of accordance with banking regulatory requirements. The process enables collateral instruments to mitigate credit risk is a component of business higher-risk loans to be identified using qualitative and quantitative and credit risk strategies. The protection instruments principally used risk indicators (e.g., sector information, management accounting data, by Postbank consist of real estate liens to secure real estate financing, customer and account data, and rating changes). The use of risk guarantees and credit derivatives, and financial collateral and other indicators to enable the early identification of an increasing risk of physical collateral. default enables Postbank to take risk mitigation measures in a timely manner, to develop and implement loan restructuring plans with the The back office division is responsible for collateral management, borrower if necessary, or to arrange for settlement. which includes recognition of an instrument as collateral, its legal ranking and regular review and measurement, as well as the adminis When a corporate loan is identified as having a higher risk, the bor tration of the collateral taken into account. The exposure manage rower in question is placed on a watch list. In the case of hard risk ment systems provide electronic support for the management of indicators, the individual loan is mandatorily transferred to the watch immovable collateral. The amounts recognized as collateral are reviewed list; if there are only soft risk indicators, the decision is made at the at fixed intervals, depending on the type of protection; as a rule, discretion of the relevant credit specialist. The watch list is constantly this occurs annually or at shorter intervals in the case of critical updated by the various lending departments and submitted quarterly exposures. to the member of the Management Board responsible for Lending and to the Credit Risk Committee. The largest individual exposures Guarantees and credit derivatives must be irrevocable and uncondi and loans that were approved by the Group Management Board are tional in order to qualify as credit risk mitigation instruments when reported to the Group Management Board and the Loan and Equity calculating the minimum capital requirements for credit and counter Investments Committee of the Supervisory Board as part of the quar party risk. Only guarantees by countries (central and regional govern terly credit risk report. ments and local authorities), other public-sector entities, banks, supranational organizations, and legal persons with a rating of at As a reaction to the crisis in the financial markets and the resultant least A- are recognized. With regard to credit derivatives, guarantors deterioration of the credit standing of many clients and counterpar and protection sellers are subject to the same risk classification, ties, Postbank reviewed its procedures during the year under review risk limitation, and risk monitoring procedures as borrowers. and introduced adjustments. The changes relate particularly to the identification and documentation of exposures at risk of impairment Real estate liens are taken into account when calculating the possible or in need of restructuring. A corporate loan intensive handling unit loss arising from default on a loan. In the event that a borrower has already been created in the Lending division. It is responsible for becomes insolvent on a long-term basis, the collateral is realized. the Group-wide standardized application of the watch list and the adjustment of relevant procedures for the early recognition of risks Loan collateral in the Corporate Banking segment taking the form and the detection of losses. of real estate liens is reviewed regularly, and at least annually, for impairment at the level of the properties concerned; in Germany, market developments are additionally monitored using the fair value fluctuation concept produced by the Zentraler Kreditausschuss (ZKA –

70 Fiscal Year I Group Management Report I Risk Report

Managing credit risk at portfolio level borrower relationships in the portfolio model and the portfolio Portfolio management management systems are being promptly implemented. In addition to monitoring individual risks, the Postbank Group calcu lates the credit value at risk (CVaR) for all Group exposures subject Portfolio structure to credit risk. The credit value at risk is the potential negative change The following table provides an overview of the key credit risk indi in the present value of the total loan portfolio resulting from actual cators for the various profit centers as of December 31, 2009 (calcu or potential credit risk losses that will not be exceeded within one lated on November 30, 2009) as compared to the end of 2008. The year for a 99.93 % probability. Under Postbank’s Group-wide risk- volume for the Group loan portfolio reported in this table differs from For our Shareholders bearing capacity concept, CVaR, as a measure of the unexpected loss the “maximum counterparty credit risk” shown lower down in An unsere Investoren from credit risk, must be backed by risk capital. respect of two factors: Firstly, the date used for calculating CVaR is the last day of the preceding month and, secondly, carrying amounts In contrast, the expected loss indicated in the “Credit risk” table is or fair values, or credit equivalent amounts, are used to fully quantify the expected amount of losses from credit risk in the Group portfolio, the credit risk when calculating CVaR, depending on the item. expressed in terms of the default amount expected within a one-year period. This is calculated approximately as the product of the default Credit risk Volume Expected loss CVaR1 probability, the total size of exposure, and the loss rate. It depends Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, on the rating and the term of the counterparty or transaction. The ex 2009 2008 2009 2008 2009 2008 pected loss does not contribute to the Bank’s overall risk, but is factored €m €m €m €m €m €m Our Business Divisions into margin calculations via the standard risk costs. Unsere Geschäftsfelder Corporate Banking 28,422 25,860 127 77 228 205 CVaR is measured using a credit risk model that allows the consistent Retail Banking 46,162 46,067 278 213 186 199 capture of all credit risks. CVaR is calculated on the basis of the Financial Markets 141,800 142,903 440 210 1,755 848 migration behavior of borrower-specific creditworthiness and correla Other tion effects within the portfolio, so as to quantify risks arising from (banks/local an adverse concentration of borrowers in terms of their sector, size authorities) 4,530 6,056 3 4 101 108 category, creditworthiness, and country. The probability of a rating BHW 39,417 34,1732 104 66 68 63 change (migration) is continually updated and adjusted to reflect the Total (incl. Our Responsibility Our Responsibility changes observed in the current economic environment. In calculat portfolio effect) 260,331 255,060 952 570 1,765 877 ing CVaR, all loans and advances are recorded together with their 1 Confidence level 99.93 %; due to diversification effects, the CVaR in the Group loan portfolio is lower than the sum of the individual CVaRs for the business divisions future cash flows and discounted to the observation date, thus allow 2 The portfolio of trust activities of BHW Bausparkasse AG is only shown under Retail ing the loan loss risk to be measured over a one-year observation Banking, while previously this item was also shown under BHW; 2008 figures restated period, as well as the effects on the present value of all changes in creditworthiness occurring outside the observation period. Credit risk The total portfolio fell slightly by 0.8 % in 2009, from €262.5 billion is measured using current internal and external credit ratings as well at the end of 2008 to €260.3 billion. The expected loss rose by 67 % as internally and externally calculated assumptions relating to recov as against December 31, 2008 while the unexpected loss doubled. ery rates. The increase in the figures for the expected loss and the unexpected loss is primarily due to higher loss expectations for each rating class External input parameters for the calculation of CVaR include con (allocation of rating classes to expected loss with reference to the Group Management Report stantly updated rating agency data, migration tables derived from Postbank master scale, which has been adjusted) as a result of the this data, sector/product default probabilities and correlations, credit economic environment and to the rating downgrades caused by the spreads (risk premiums for various rating categories/grades), as well financial market crisis as well as to an additional rise in risk concen trations, particularly with respect to “A” rated banks managed by as the volatility of these parameters in a Monte Carlo simulation. 62 Homogeneous, granular receivables are aggregated when calculating the Financial Markets division (see section “Risk concentrations” in the CVaR and are not computed at individual transaction level. the chapter “Overarching risk management”). A further year-on-year These relate in particular to retail products. decline in Group loans to banks and local authorities and an increase in BHW Bausparkasse AG’s portfolio and in loans to corporate The updated portfolio and market data are used to compute the customers can be observed. CVaR of the Group loan portfolio every quarter. For individual products/ business divisions with special risk structures, the CVaR is calculated Consolidated Financial Statements daily. The CVaR in the Group loan portfolio is lower than the sum of the individual CVaRs for the business divisions because of diversifica tion effects. The utilization of the CVaR limits made available to individual profit centers by the Credit Risk Committee and that of the aggregate credit risk limit is monitored on an ongoing basis.

In addition to the CVaR calculations, the Group loan portfolio is subject to regular stress testing and sensitivity analyses across all Other Information risk classes with the aim of quantifying losses that might arise from extreme events. Improvements in the identification of risk-relevant

71 The following chart illustrates the increase of the CVaR and the As of December 31, 2009, the maximum exposure to credit risk expected loss as a result of the financial market crisis, together with was as follows (compared with December 31, 2008): the stagnation of the overall bank portfolio: Maximum counterparty risk Risk-bearing financial instruments Maximum counterparty Overall bank portfolio and risk development over time risk exposure Portfolio, €m Risk €m Dec. 31, 2009 Dec. 31, 2008 €m €m 300,000 1,750 1,650 Trading assets 20,471 16,573 1,550 250,000 1,450 Held for trading 20,471 16,573 1,350 1,250 1,150 Hedging derivatives 520 474 200,000 1,050 950 Held for trading 520 474 850 150,000 750 650 Loans and advances to other banks 14,467 18,684 550 Loans and receivables 14,467 18,616 450 100,000 350 Available for sale 0 68 250 Loans and advances to customers 111,043 105,318 Dec/05Mar./06Jun./06Sep./06Dec./06Mar./07Jun./07Sep./07Dec./07Mar./08Jun./08Sep./08Dec./08Mar./09Jun./09Sep./09Dec./09 Loans and receivables 102,408 96,713 ■ Portfolio ■ EL ■ CVaR 99.93 % Fair value option 8,635 8,605

Investment securities 72,359 83,058 Loans and receivables 59,401 68,859 Held to maturity 73 186 Available for sale 12,885 14,013

Subtotal 218,860 224,107

Contingent liabilities from guarantees 1,105 1,296

Other liabilities (irrevocable loan commitments) 21,964 23,205

Total 241,929 248,608

In contrast to the “Credit risk” table, the “Maximum counterparty credit risk” table breaks down the maximum exposure to credit risk in accordance with IFRS 7.36 (a) into categories of risk-bearing finan cial instruments. This figure is reported as a gross amount, since risk- bearing financial instruments are recognized and measured without accounting for credit risk mitigation techniques, recognized trans actions are recorded at their carrying amounts, and the maximum counterparty credit risk exposures resulting from the utilization of irrevocable loan commitments or other off-balance sheet items corres pond to all externally approved lines. This representation contains no information on ratings or collateral, in contrast to the economic risk quantification contained in the “Credit risk” table. In addition, reporting date variances exist between the two tables as of December 31, 2009.

As of December 31, 2009, Postbank improved the database relating to the following loan portfolio tables. Shifts occur in the tables as against the prior year’s report due to the different classification criteria used. In order to assure comparability, certain prior-year figures were adjusted, in accordance with the footnotes relating to the following tables.

72 Fiscal Year I Group Management Report I Risk Report

Sector structure of the loan portfolio The following table illustrates the risk concentrations by sector and borrower group, broken down into exposure classes. Unlike in the previous reports, the CRE portfolio is now reported as a separate sector. The relevant prior-year figures have been restated. The perceptible shifts in the tables compared to the previous year were partially caused by the fact that instead of using the subsidiaries’ sector-specific allocations, uniform, Group-wide sector allocations are now used. For our Shareholders An unsere Investoren

Risk concentration by sector and borrower group1 Risk-bearing financial Retail Banks/insurers/ Countries Commercial Services/ Industry Other sectors Total instruments customers financial services real estate wholesale finance and retail Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m

Trading assets 212 216 19,666 15,726 105 17 95 40 103 109 14 171 276 294 20,471 16,573

Held for trading 212 216 19,666 15,726 105 17 95 40 103 109 14 171 276 294 20,471 16,573 Our Business Divisions Unsere Geschäftsfelder

Hedging derivatives – – 520 429 – 25 – – – 13 – – – 7 520 474 Held for trading – – 520 429 – 25 – – – 13 – – – 7 520 474

Loans and advances to other banks – – 14,332 17,896 103 – 32 788 0 0 – – 0 0 14,467 18,684 Loans and receivables – – 14,332 17,828 103 – 32 788 0 0 – – 0 0 14,467 18,616 Available for sale – – – 68 0 – – – – – – – – – – 68

Loans and advances

to customers 79,915 75,281 2,144 2,236 2,467 3,620 16,661 14,724 5,054 3,455 2,577 2,089 2,225 3,913 111,043 105,318 Our Responsibility Loans and receivables 71,292 66,676 2,144 2,236 2,465 3,620 16,661 14,724 5,054 3,455 2,577 2,089 2,215 3,913 102,408 96,713 Fair value option 8,623 8,605 – – 2 – – – – – – – 10 – 8,635 8,605

Investment securities – – 43,850 49,581 25,012 26,873 – 29 1,784 850 960 4,152 753 1,573 72,359 83,058 Loans and receivables – – 37,651 44,248 19,118 19,369 – 4 1,264 778 742 3,569 626 891 59,401 68,859 Held to maturity – – 73 186 – – – – – – – – – – 73 186 Available for sale – – 6,126 5,147 5,894 7,504 – 25 520 72 218 583 127 682 12,885 14,013

Subtotal 80,127 75,497 80,512 85,868 27,687 30,535 16,788 15,581 6,941 4,427 3,551 6,412 3,254 5,787 218,860 224,107

Contingent liabilities 32 290 713 623 – 24 74 93 125 158 89 21 72 87 1,105 1,296 Group Management Report Other liabilities 16,729 19,021 447 481 111 32 1,287 922 1,872 – 68 1,226 461 292 2,356 21,964 23,205

Total 96,888 94,808 81,672 86,972 27,798 30,591 18,149 16,596 8,938 4,517 4,866 6,894 3,618 8,230 241,929 248,608 1 Prior-year figures restated due to the addition of the “Commercial real estate finance“ column

The sector distribution of the credit-risk bearing instruments, measured in terms of volume, has a balanced structure and continues to present a stable picture. The Group’s loan portfolio consists mainly of loans to retail customers with a focus on domestic private mortgage lend ing. It also includes loan exposures in the Corporate Banking divi sion, predominantly in the German business customers segment, and Consolidated Financial Statements in domestic and international commercial real estate finance. The broadly diversified holdings of investment securities are dominated by a portfolio of mainly German and European government bonds as well as bonds issued by banks (including covered bonds and Pfand briefe), insurers, and other financial service providers. A target port folio has been defined as part of the credit risk strategy that has been optimized in terms of diversification and that serves to manage investments in the non-retail area. Other Information

73 Regional distribution of the loan portfolio The Postbank Group has established country-specific limits for credit allocation in order to manage country risk. The levels of country limits are substantially determined by internal and external ratings, and by the economic strength of the particular country measured by gross domestic product. A Group-wide database keeps track of the limits established for each country and their current utilization, as well as the economic data used in allocating countries to risk categories. In the course of the financial market crisis, various country limits were again blocked for new business in 2009.

Risk concentration by geographical region Risk-bearing financial instruments Germany Western Europe Other regions Total Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 €m €m €m €m €m €m €m €m

Trading assets 5,507 3,776 9,766 11,256 5,198 1,541 20,471 16,573 Held for trading 5,507 3,776 9,766 11,256 5,198 1,541 20,471 16,573

Hedging derivatives 132 128 259 183 129 163 520 474 Held for trading 132 128 259 183 129 163 520 474

Loans and advances to other banks 6,842 9,445 6,572 7,856 1,053 1,383 14,467 18,684 Loans and receivables 6,842 9,377 6,572 7,856 1,053 1,383 14,467 18,616 Available for sale – 68 – – – – – 68

Loans and advances to customers 93,194 88,825 13,412 12,346 4,437 4,147 111,043 105,318 Loans and receivables 84,597 80,220 13,383 12,346 4,428 4,147 102,408 96,713 Fair value option 8,597 8,605 29 – 9 – 8,635 8,605

Investment securities 26,561 31,713 37,915 42,159 7,883 9,186 72,359 83,058 Loans and receivables 19,595 24,034 33,206 37,648 6,600 7,177 59,401 68,859 Held to maturity 73 176 – 10 – – 73 186 Available for sale 6,893 7,503 4,709 4,501 1,283 2,009 12,885 14,013

Subtotal 132,236 133,887 67,924 73,800 18,700 16,420 218,860 224,107

Contingent liabilities 831 1,143 216 76 58 77 1,105 1,296

Other liabilities 20,541 21,093 976 1,256 447 856 21,964 23,205

Total 153,608 156,123 69,116 75,132 19,205 17,353 241,929 248,608

The regional distribution of the credit volume again reveals a concen Postbank, in principle, uses the same rating for risk management as tration on the domestic German market in line with Postbank’s strat for capital requirements, which is normally an issuer’s rating instead egy, as well as selected exposures in Western Europe and in North of the rating of a specific issue. Postbank is in possession of a large America, some of which were entered into by our foreign subsidiaries portfolio of Pfandbriefe and similarly collateralized issues which are and branches. These exposures relate primarily to commercial real relatively low risk in nature. It is for this reason that issue ratings are estate finance with a total volume of €6.1 billion. Of this figure, some shown in the following table. The distribution of ratings in the Group €3.0 billion is attributable to exposures in the United States and €3.1 loan portfolio is a reflection of the Postbank Group’s conservative billion to exposures in the United Kingdom. approach. The higher rating categories predominate: 93 % of the rated portfolio is classified as investment grade (rated BBB or better). Credit structure of the loan portfolio The following table shows the credit quality of the risk-bearing finan cial instruments for Postbank’s non-retail business that were neither past due nor for which impairment losses had been recognized as of the December 31, 2009 reporting date (with the exception of “contingent liabilities” and “other liabilities”).

74 Fiscal Year I Group Management Report I Risk Report

Credit quality of financial instruments in the non-retail business that are neither past due nor impaired1 Risk-bearing financial instruments AAA AA A BBB < BBB Not rated Total Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 €m €m €m €m €m €m €m €m €m €m €m €m €m €m

Trading assets 213 116 1,454 1,618 17,782 14,471 253 85 146 41 411 26 20,259 16,357

Held for trading 213 116 1,454 1,618 17,782 14,471 253 85 146 41 411 26 20,259 16,357 For our Shareholders An unsere Investoren

Hedging derivatives – 34 15 387 475 19 – 16 – 11 30 7 520 474 Held for trading – 34 15 387 475 19 – 16 – 11 30 7 520 474

Loans and advances to other banks 546 643 424 3,570 9,869 12,877 3,124 1,212 128 270 229 18 14,320 18,590 Loans and receivables 546 643 424 3,502 9,869 12,877 3,124 1,212 128 270 229 18 14,320 18,522 Available for sale – – – 68 – – – – – – – – – 68

Loans and advances to customers 4,020 474 5,509 2,726 4,872 5,770 7,781 10,752 4,648 6,829 3,049 596 29,879 27,147 Loans and receivables 4,020 474 5,509 2,726 4,872 5,770 7,781 10,752 4,646 6,829 3,039 596 29,867 27,147 Fair value option – – – – – – – – 2 – 10 – 12 – Our Business Divisions Unsere Geschäftsfelder Investment securities 27,633 35,095 19,914 25,995 16,459 12,217 3,033 5,233 3,627 2,309 1,183 1,657 71,849 82,506 Loans and receivables 21,300 26,743 18,752 24,617 14,619 11,008 2,239 4,361 1,389 1,067 669 737 58,968 68,533 Held to maturity – 186 – – 32 – 41 – – – – – 73 186 Available for sale 6,333 8,166 1,162 1,378 1,808 1,209 753 872 2,238 1,242 514 920 12,808 13,787

Total 32,412 36,362 27,316 34,296 49,457 45,354 14,191 17,298 8,549 9,460 4,902 2,304 136,827 145,074 1Prior-year figures restated due to changes in the rating distribution

Compared with year-end 2008, the table shows an increase in the neither past due nor for which impairment losses had been recog

A rating category as a result of the measurement of derivatives, nized as of the December 31, 2009 reporting date (with the exception Our Responsibility forward and money market transactions, and investment securities. of “contingent liabilities” and “other liabilities”). Postbank’s retail There has been an overall deterioration of borrowers’ creditworthiness business shows a good credit rating structure. Legacy retail business as a result of the crisis in the financial markets. The current rating portfolios (mainly mortgage loans extended before August 2004) distribution for loans and advances to other banks, corporates, and and purchased loans and advances are reported using pool ratings. In countries is within the target rating distribution category as specified other words, homogeneous risk pools are established by segment and in the credit risk strategy, and thus within the required range. measured individually according to the relevant Basel II parameters. The proportion of portfolios covered by these pool ratings is declining Similarly, the following table illustrates the credit quality of the risk- gradually since each new transaction is rated on an individual basis. bearing financial instruments for Postbank’s retail business that were Group Management Report Credit quality of financial instruments in the retail business that are neither past due nor impaired Risk-bearing financial AAA AA A BBB < BBB Basel II Total instruments Pool rating/ not rated

Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 €m €m €m €m €m €m €m €m €m €m €m €m €m €m

Trading assets 1 – 9 15 33 69 82 55 77 74 10 3 212 216 Held for trading 1 – 9 15 33 69 82 55 77 74 10 3 212 216 Consolidated Financial Statements Loans and advances to customers 2,851 2,621 5,714 5,608 7,384 6,633 13,048 11,957 18,580 16,887 27,460 30,225 75,037 73,931 Loans and receivables 2,842 2,619 5,545 5,557 6,621 6,308 10,801 10,502 16,592 14,132 24,398 26,208 66,799 65,326 Fair value option 9 2 169 51 763 325 2,247 1,455 1,988 2,755 3,062 4,017 8,238 8,605

Total 2,852 2,621 5,723 5,623 7,417 6,702 13,130 12,012 18,657 16,961 27,470 30,228 75,249 74,147 Other Information

75 Loans past due but not impaired The following table shows those risk-bearing financial instruments that were not impaired as of December 31, 2009:

Time bands for financial instruments past due but not impaired1 Risk-bearing Financial instruments past due but not impaired Fair value of financial instruments Past due ≤ 3 months Past due > 3 months, Past due > 6 months, Past due > 1 year Total the collateral for and collateral ≤ 6 months ≤ 1 year financial instruments past due but not impaired

Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 €m €m €m €m €m €m €m €m €m €m €m €m

Loans and advances to other banks 11 – – – – – – – 11 – – – Loans and receivables 11 – – – – – – – 11 – – –

Loans and advances to customers 941 1,300 223 239 389 284 385 500 1,938 2,323 1,688 2,062 Loans and receivables 816 1,300 168 239 312 284 313 500 1,609 2,323 1,480 2,062 Fair value option 125 – 55 – 77 – 72 – 329 – 208 –

Total 952 1,300 223 239 389 284 385 500 1,949 2,323 1,688 2,062

1 Prior-year figures restated due to changes in the evaluation method

The method for determining past due items has changed since the quarter. There is an ongoing review of all exposures for objective previous report, and the prior-year figures have been restated. evidence of impairment and, where needed, impairment tests are Determination of loans past due at BHW Bausparkasse AG is now conducted. based on a classification at customer rather than individual loan level. In addition, mortgage loans extended by BHW Bausparkasse AG that A collective specific valuation allowance is recognized for a portfolio were past due for less than one month or in the amount of less than of homogeneous loans with similar characteristics, to the extent that €100 are now also disclosed for the first time. The changes to the there is objective evidence that the loans have become impaired and disclosure policy do not result in any increase in risk. This can be seen the amount of the impairment for each loan can be determined with from the fact that the adjustment primarily affects the maturity band reference to past statistics on loan performance. General ratios based for arrears ≤ 3 months. on historical experience of loss rates are applied in measuring collec tive valuation allowances. The Postbank Group recognizes collective The carrying amount of financial assets that would have been past specific valuation allowances in the area of overdrafts and installment due or impaired, and the conditions of which have been renego loans, credit card loans, and mortgage loans extended by BHW tiated (renegotiated volume), is €972.2 million (December 31, 2008: Bausparkasse AG which have been past due for three to six months. €235.6 million). The following table shows all impaired financial assets as of Allowances for losses on loans and advances December 31, 2009 and December 31, 2008, broken down into loans The allowances for losses in the lending business comprise specific and advances to other banks as well as loans and advances to cus valuation allowances, collective specific valuation allowances, and tomers for which specific valuation allowances have been recognized portfolio impairment. and investment securities for which impairment losses have been recognized. The carrying amount after recognition of impairment A specific valuation allowance is recognized if there is objective losses is shown in the table as the difference between the carrying evidence that – taking into account any collateral – the estimated amount before impairment and the amount of the impairment loss. recoverable amount of the loans and advances is lower than their carrying amount, i.e., if a loan or advance is wholly or partly uncollectible and is, therefore, permanently impaired. The amount of the specific valuation allowance is measured for the respective unsecured portions of the loans and advances as the difference between the carrying amount of the loans and advances and the fair value of estimated future cash flows, including cash flows from the realization of collateral. The fair value of the collateral held is calculated for each transaction on the basis of the estimated pro ceeds from the realization of the collateral, the time of realization, and the effective interest rate of the loan or advance. Loans in the Corporate Banking segment for which a specific valuation allow ance has already been recognized, are tested for impairment each

76 Fiscal Year I Group Management Report I Risk Report

Impaired financial instruments1 Impaired risk-bearing Carrying amount Amount Carrying amount Fair value of financial instruments before impairment of impairment after impairment collateral for and collateral loss impaired instruments

Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 €m €m €m €m €m €m €m €m

Loans and advances to other banks 136 94 64 52 72 42 – – For our Shareholders

Loans and receivables 136 94 64 52 72 42 – – An unsere Investoren

Loans and advances to customers 4,189 1,917 1,577 1,270 2,612 647 2,307 949 Loans and receivables 4,133 1,917 1,575 1,270 2,558 647 2,255 949 Fair value option 56 – 2 – 54 – 52 –

Investment securities 1,006 1,176 496 624 510 552 – – Loans and receivables 918 814 485 488 433 326 – – Available for sale 88 362 11 136 77 226 – –

Total 5,331 3,187 2,137 1,946 3,194 1,241 2,307 949 Our Business Divisions 1 Prior-year figures restated due to additions to allowance for losses on loans and advances of €90 million Unsere Geschäftsfelder

As a result of the financial market crisis, 2009 saw a substantial increase an individual basis in line with the relevant risk monitoring processes. in the portfolio of impaired financial assets. In the fourth quarter of The relevant LIP factors have been increased due to the high degree 2009, the total portfolio, in particular commercial real estate finance, of uncertainty regarding the identification of losses in the turbulent was subject to intensive review for which conservative standards real estate markets, in particular in the United States and the United were applied. This fact is also reflected in the increase. An impair Kingdom. ment loss of €0.3 billion is due to the fact that retail loans for which collective specific valuation allowances have been recognized are Securitization positions Our Responsibility Our Responsibility included in this table. Securitizing financial assets (asset securitization) makes it possible to transfer the underlying credit risk to third parties. Usually, entire At the end of January 2010, consequently within the period permitted exposure pools consisting of two or more subclasses of risk (tranches) for the measurement of balance sheet items for 2009, the Bank con entailing varying degrees of risk are transferred. ducted an intensive risk-oriented review of all watch-list exposures in order to determine the existence of any impairment triggers and Postbank acts as both investor and originator in asset securitization carried out the necessary impairment tests taking into account all transactions. information to hand at that date. The impairment tests of each expo sure particularly included the effect of the persisting economic crisis Investor on the probability of repayment and any likely recoveries. In the course of credit substitution transactions, Postbank has invested in structured credit products (SCPs), among other things. Specifically, Group Management Report This resulted in a significant increase in allowances for losses on loans these relate to asset-backed securities (ABSs), collateralized debt and advances in the fourth quarter as a result of the difficult market obligations (CDOs), collateralized loan obligations (CLOs), residential environment, especially for CRE portfolios. This, however, did not lead mortgage-backed securities (RMBSs), and commercial mortgage- to an increase in the Bank’s expected full-year allowances that had backed securities (CMBSs). Investor positions in the banking book already been determined by taking the impact of the crisis into account. are classified and measured as one of the two IFRS categories “loans Exposures were also identified for which allowances for loans and and receivables” or “available for sale”, depending on the intention advances had been established in the first three quarters of 2009 but and structure of the investment. Securitization positions are generally where the loan loss allowances should have been recognized in the rated by at least one recognized rating agency (Standard & Poor’s, 2008 financial statements. These allowances for losses on loans and Moody’s, or FitchRatings) and generally have a rating of BBB- or advances have therefore been shifted to the 2008 reporting period. better at the time of acquisition. There is no internal rating model for

these positions. The portfolio is valued periodically using an internal Consolidated Financial Statements The portfolio-based valuation allowances account for all loan losses valuation model that analyzes the individual portfolio components at that have occurred but that Postbank has yet to identify; this may be underlying level. because the respective customer is still currently meeting his or her payment obligations, for example. Postbank factors in expected default The increased rates of defaults and losses relating to corporates and probabilities, loss rates, and the estimated time between when the securitization exposures observed in 2009 led Postbank to revise default occurs and when this is identified (the loss identification period parameters of the internal valuation model used to calculate portfolio (LIP) factor), depending on the type of product and customer group loss distributions for its 2009 financial statements. The changes in the concerned in each case. Default probabilities and loss rates for defaults parameters have led to an increase in losses and defaults, that will Other Information at the portfolio level are updated during the annual validation and stretch into 2011, in connection with refinancing instruments relating recalibration of the IRBA rating systems; LIP factors are estimated on to securitizations, particularly synthetic securitizations.

77 As of December 31, 2009, the total volume of the portfolio amounted the default of CIT and the monoliner FGIC led to losses in the corporate to €5.8 billion (December 31, 2008: €6.3 billion). The reduction in the CDO portfolios. This brings the aggregate impairment losses recog size of the portfolio as against the December 31, 2008 level is primarily nized in income for affected portfolios since the beginning of the due to exchange rate effects and redemptions. SCP portfolios are very financial market crisis in mid-2007 to €365 million, and the aggregate strictly monitored by Postbank and are subject to monthly impairment measurement losses recognized on embedded derivatives to €1,523 107 tests. Regular measurement of the portfolio using an in-house model million. For measurement details please see Note 4 (h). resulted in the recognition of total impairment losses of €97 million in 2009, as well as measurement losses on embedded derivatives Postbank’s securitization positions as of December 31, 2009 were as amounting to €652 million. These figures were within the range follows: expected by the Bank. Many ratings were downgraded significantly in the first half of the year in particular. In the second half of 2009,

Securitization exposures: volumes by rating category Securitization exposures AAA AA A BBB < BBB Total Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 €m €m €m €m €m €m €m €m €m €m €m €m

CMBSs 47 86 84 124 104 46 19 14 27 0 281 269 RMBSs 310 448 159 91 138 120 39 41 42 12 687 712 Corporate CDOs 317 574 151 275 154 173 111 829 1,886 920 2,619 2,772 Non-corporate CDOs 0 208 95 149 74 270 111 204 1,351 991 1,630 1,822 Other ABSs 319 423 74 110 20 5 28 101 149 69 590 708

Total 993 1,739 562 747 490 615 308 1,190 3,455 1,993 5,809 6,283 thereof in the trading book 17 45 9 13 – – – – 10 – 36 58

The regional focuses for the securitization positions are as follows:

Securitization exposures: volumes by regional focus CMBSs RMBSs Corporate CDOs Non-corporate CDOs Other ABSs1 Total Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 €m €m €m €m €m €m €m €m €m €m €m €m

Germany 83 64 150 124 – – – – 55 70 288 258 U.K. 96 94 126 178 31 32 – – 85 76 338 381 France 2 2 17 – – – – – – – 19 2 €m

in Spain/Portugal – – 99 109 – – – – – 24 99 134 Rest of Europe 94 103 247 239 450 440 229 291 24 23 1,045 1,096 U.S.A. 5 6 44 52 491 517 969 1,098 304 376 1,814 2,050 Others2 – – 5 9 1,646 1,783 432 433 123 139 2,206 2,363

Total 281 269 687 712 2,619 2,772 1,630 1,822 590 708 5,809 6,283

Germany 30 % 24 % 22 % 17 % – – – – 9 % 10 % 5 % 4 % U.K. 34 % 35 % 18 % 25 % 1 % 1 % – – 14 % 11 % 6 % 6 % France 1 % 1 % 2 % – – – – – – – 0 % 0 % Spain/Portugal – – 14 % 15 % – – – – – 3 % 2 % 2 % Rest of Europe 34 % 38 % 36 % 34 % 17 % 16 % 14 % 16 % 4 % 3 % 18 % 17 %

Relative distribution U.S.A. 2 % 2 % 6 % 7 % 19 % 19 % 59 % 60 % 51 % 53 % 31 % 33 % Others2 – – 1 % 1 % 63 % 64 % 26 % 24 % 21 % 20 % 38 % 38 %

Total 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 1 Mainly Consumer ABSs und Commercial ABSs 2 Or without a specific focus

78 Fiscal Year I Group Management Report I Risk Report

As of the reporting date of December 31, 2009, only a small number I To monitor the performance of the risk classification procedures at of securitization positions (total nominal value: approximately €28 the level of individual loans (rating and scoring models), model million) were hedged with monoliners. In addition, the CDO portfolio monitoring reports are prepared by business division on a monthly includes a number of structures with exposures to bond insurers. to quarterly basis. The aim of these reports is to analyze and Given the ratings downgrades seen in this sector in 2009 and the document the performance of the rating and scoring models using uncertainty surrounding the future, additional negative effects are a brief validation process. Compliance with the model, i.e., its included in the 2010 planning. proper application, is also examined. For our Shareholders The volume of Postbank’s investor positions in fungible commercial I At the level of individual loans, the watch lists are another instrument An unsere Investoren real estate loans (CMBSs) amounted to €281 million as of the report for reporting larger and impaired exposures. ing date (December 31, 2008: €269 million). These positions consist almost exclusively of European CMBSs with a regional focus on the Environmental risks United Kingdom and Germany. Postbank also takes into account environmental risk when making credit decisions. The Postbank Group and its employees are aware of their Originator social responsibility both in their lending policy and in individual In addition to acting as an investor, Postbank also acts as an originator. credit decisions. The following synthetic securitization transactions involving the secu ritization of residential mortgage loans relating to Germany and Italy Postbank understands that identifying and quantifying environmental Our Business Divisions not only reduced regulatory capital requirements but also diversified risk must form part of its standard risk assessment and management Unsere Geschäftsfelder risk. As of the reporting date, Postbank did not conduct securitization procedures in its domestic and foreign business. With regard to its transactions relating to revolving counterparty credit risk. customers, Postbank believes that fulfilling current environmental standards and acting responsibly towards the environment are key PB Domicile 2006-1 €1,985 million (Deutsche Postbank AG) factors for assessing corporate governance. Provide Blue 2005-1 €809 million (BHW Bausparkasse AG) Provide Blue 2005-2 €2,147 million (BHW Bausparkasse AG) As a result, Postbank meets the requirements for sustainable and PB Domicilio 2007-1 €1,066 million (BHW Bausparkasse AG) future-oriented management and complies with international guide lines such as the UN Global Compact. Our Responsibility Our Responsibility Postbank also structured the PB Consumer 2008-1 and PB Consumer 2009-1 originator securitization transactions as traditional securitization Monitoring and managing liquidity risk transactions, and the Provide Domicile 2009-1 originator securitization Definition of risk as a synthetic securitization; no significant transfer of risks has taken The Postbank Group distinguishes between two types of risk in liquidity place so far. risk management: illiquidity risk and liquidity maturity transformation risk. Illiquidity risk is defined as the risk of being unable to meet its Risk reporting current or future payment obligations, either in the full amount due, The Postbank Group uses a variety of reporting instruments for or as they fall due. Liquidity maturity transformation (LMT) risk presenting credit risk: describes the risk of increased refinancing costs due to a change in the Bank’s refinancing curve. I The credit risk report, which is submitted quarterly to the Group Group Management Report Management Board and the Loan and Equity Investments Committee Organization and risk strategy of the Supervisory Board, provides information on the develop- The responsibility for performing centralized risk management tasks at ment of the Group’s current loan portfolio and on the default history the Postbank Group lies with the Management Board. The Manage at the level of individual transactions. In addition to presenting ment Board has delegated liquidity risk management to the Market loan portfolio and credit risk indicators, the report includes details Risk Committee (MRC), which is monitored by the Supervisory Board. of the largest exposures aggregated by individual borrowers and the largest exposures in default, as well as the utilization of risk limits. The Postbank Group has established clear rules with regard to res ponsibility for liquidity risk management. In general, Deutsche Post I The credit monitoring report is prepared quarterly at the same time bank AG’s Financial Markets division is responsible for the centralized as the credit risk report and contains additional detailed information operational management of liquidity risk. BHW Bausparkasse AG, the

at business division and product level regarding the management foreign subsidiaries in New York and Luxembourg, and the London Consolidated Financial Statements of credit risk by the operating units. The credit monitoring report is branch manage their risks independently using uniform Group-wide approved by the Credit Risk Committee. procedures and processes. In the event of a liquidity shock, the Liquidity Crisis Committee has clear responsibility and authority over I The credit matrix provides detailed information on credit risk at all Postbank units responsible for portfolios as well as all portfolio portfolio level (CVaR, rating distributions, sector distributions, units at the subsidiaries and foreign branches. concentration risks, limit utilization, target/actual portfolios), some of which is also included in the credit risk report and the credit Risk Controlling functions as a Group-wide independent monitoring monitoring report in an aggregated form. The Credit Risk unit which is responsible for operational limit monitoring and reporting, Other Information Committee also approves the credit matrix on a quarterly basis. in addition to the methods and models used for risk identification, measurement, and management.

79 The Postbank Group has laid down the basis for dealing with liquidity The following table shows the financial liabilities as of December 31, risk, among other things, in its overarching risk strategy. 2009 and December 31, 2008, broken down into residual maturity bands. The order of the rows in the table has been modified as against the The goal of liquidity management is to ensure that Postbank is solvent 2008 Risk Report in line with the provisions of the amendments to at all times – not only under normal conditions, but also in stress IFRS 7. The undiscounted contractual cash flows from on- and situations. Due to its strategic focus as a retail bank, Postbank enjoys off-balance sheet liabilities have been assigned to the respective a strong refinancing base in its customer business and is therefore categories. In conformity with these requirements, the contractual relatively independent of the money and capital markets. To guard cash flows of the financial liabilities are presented in accordance with against unexpected cash outflows, an extensive portfolio consisting the worst-case scenario, meaning that if the financial liabilities of unencumbered ECB-eligible securities is held that can be used to involve options or termination rights that could affect their maturity obtain liquidity rapidly. To ensure the additional diversification of its date, the most unfavorable case from a liquidity perspective is refinancing activities, Postbank has a Pfandbrief license allowing it assumed. This is particularly relevant for demand deposits and to issue public-sector Pfandbriefe and mortgage Pfandbriefe. savings deposits that are subject to call or have a short maturity of usually three months but that are available for the Bank for a longer In keeping with the increasing importance of liquidity management, period of time, statistically speaking. a project was set up in 2007 to successively enhance liquidity risk management. This was completed according to plan at the end of 2009. As a result, Postbank has laid important foundations for differentiated liquidity management in keeping with the requirements derived from the “Principles for Sound Liquidity Risk Management and Supervision”. The current enhancement of the liquidity manage ment concept takes into account the ongoing regulatory debate and in particular the structural liquidity position monitored over the course of several years. This concept is scheduled to be implemented operationally in 2010.

In the year under review, Postbank met the regulatory liquidity re quirements in accordance with section 11 of the KWG in conjunction with the Liquiditätsverordnung (LiqV – German Liquidity Regulation), which entered into force on January 1, 2007, at all times.

Risk management and control The Liquidity Management department in the Financial Markets division is responsible for the central management of liquidity risk, focusing on managing liquidity maturity transformation and ensuring continuous solvency in the Group.

The management process is based on a number of pillars. Risk Controlling assesses the liquidity status of the Postbank Group each business day on the basis of funding matrices and cash flow forecasts, with operational management of risk being performed on the basis of the liquidity status. Risk management is also based on a series of more far-reaching analyses of liquidity management, in addition to regular Group-wide liquidity and issue planning. Risk management activities focus above all on ensuring solvency at all times, even in stress situations. To ensure this, the Bank’s liquidity positions are subject to a series of stress tests at least once a month. These simulated calculations reflect external changes in a variety of market factors, anxious reactions of customers, and structural changes in funding resources. The stress tests also identify and analyze risk concentrations with respect to the Postbank Group’s specific liquidity situation, e.g., with respect to its savings and demand deposits or its access to the collateralized and uncollateralized money markets.

The results of the stress tests show that the Postbank Group’s liquidity position remains solid, despite the substantially tougher market conditions engendered by the financial market crisis. This is due not least to the further increase in customer deposits and the Bank’s extensive portfolio of ECB-eligible securities.

80 Fiscal Year I Group Management Report I Risk Report

Liabilities by remaining maturity Liabilities Payable on demand ≤ 3 months > 3 months > 1 year > 5 years Total and ≤ 1 year and ≤ 5 years Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 €m €m €m €m €m €m €m €m €m €m €m €m

Non-derivative For our Shareholders

liabilities 55,753 49,937 85,856 107,179 36,866 35,334 24,851 14,819 28,079 32,852 231,405 240,121 An unsere Investoren Deposits from other banks 312 648 19,995 46,437 12,338 6,283 4,913 4,834 5,271 6,970 42,829 65,171 Due to customers 33,474 26,083 60,046 50,485 19,496 25,096 10,589 4,258 16,196 19,089 139,802 125,011 Debt securities in issue 0 0 5,108 9,415 3,437 3,813 7,231 4,785 3,499 1,533 19,275 19,547 Subordinated debt 0 0 54 142 1,585 122 2,093 885 3,091 5,212 6,823 6,361 Other liabilities 2 2 653 700 9 20 24 57 22 48 711 826 Contingent liabilities and 1

other obligations 21,965 23,205 0 0 0 0 0 0 0 0 21,965 23,205 Our Business Divisions Unsere Geschäftsfelder Derivative liabilities 0 0 2,642 141 7,024 3,480 13,610 14,620 2,432 6,054 25,707 24,296 Hedging derivatives 0 0 216 61 516 434 1,557 2,209 681 1,292 2,969 3,997 Trading liabilities 0 0 2,426 80 6,507 3,046 12,053 12,411 1,752 4,763 22,738 20,300

Total 55,753 49,937 88,498 107,321 43,889 38,814 38,460 29,439 30,512 38,906 257,112 264,417

1 As of December 31, 2008, the “Contingent liabilities“ item includes only irrevocable loan commitments

In contrast to the presentation of the contractual cash flows of the Risk reporting financial liabilities, the following overview of the liquidity status of The Postbank Group regularly uses a variety of instruments to report Our Responsibility Our Responsibility the Postbank Group as of December 31, 2009 presents the expected liquidity risk. The tense market situation, however, has led us to cash inflows/outflows and the liquidity sources available for the enhance these instruments and, in some cases, supplement them with coming twelve months on a cumulative basis in accordance with the ad hoc analyses for individual key items. The standard reports are principles of internal liquidity management. described in more detail below:

The expected values for cash outflows from liabilities with no fixed I The Group Management Board, the members of the Market Risk capital commitment, such as savings and checking account deposits, Committee, and the relevant liquidity management units are in- the probability of utilization of irrevocable loan commitments, and formed daily by Risk Controlling on the liquidity status including the quality of the fungible assets available for ensuring liquidity are limit utilization at Group and unit levels. A detailed reconciliation based in part on observed historical data and in part on estimates of cash inflows and outflows with available sources of liquidity is that are validated regularly. provided. Group Management Report

These data and estimates show that the Postbank Group has signi I Supplementing this, the Liquidity Management department uses a ficant liquidity surpluses across all maturity bands, which underscores separate monthly report to inform the Market Risk Committee of its solid cash position. the market situation and of the Bank’s liquidity status and refinancing activities.

I The Group Management Board and the members of the Market Liquidity status of the Postbank Group as of December 31, 2009 Risk Committee receive monthly liquidity status overviews, includ- €bn ing the established scenario analyses and stress tests at Group level.

30.0 I Monthly information on liquidity ratios in accordance with the LiqV Consolidated Financial Statements 25.0 is sent to the Group Management Board as part of the Manage- ment Board information system. 20.0

15.0 I The Supervisory Board is informed on a quarterly basis of the 10.0 Postbank Group’s liquidity situation, including in the defined stress situations. 5.0

0.0 Other Information 1 2 3 6 9 12 Months

81 Monitoring and managing operational risk I Establishment of reporting thresholds for structural loss trends per Definition of risk business division (“typical loss”); Postbank defines operational risk in accordance with section 269 of the SolvV as the risk of loss resulting from inadequate or failed inter I Establishment of reporting thresholds for low-volume, high- nal processes and systems, people, or external events. This definition frequency losses. also covers legal risk, but not reputational or strategic risk. Operational risk is fully integrated into the Postbank Group’s risk-bearing To date, Postbank has used the standardized approach to calculate capacity concept. At the beginning of the third quarter of 2009, capital requirements for operational risk. An internal audit confirmed Postbank amended the procedure for including operational risk in the that the requirements under the SolvV qualifying the Bank to apply internal risk-bearing capacity concept. The calculation of operational the standardized approach were met; the BaFin and Deutsche Bundesbank risk is now based on the newly developed internal quantification were notified of this. model. The new model is used for calculating the utilization of the limit allocated to operational risk on a quarterly basis. In the case of In 2008, the Group Management Board resolved to introduce an limit exceedances, the limit for operational risk is increased – includ Advanced Measurement Approach (AMA). Implementation work ing during the course of the year – at the expense of other risk started in the second half of 2008 and continued in 2009. The internal types or of the unallocated risk cover amount. The Postbank Group’s quantification model for operational risk developed as part of the four business divisions have been allocated specific risk capital AMA implementation project went live on July 1, 2009. Since then, amounts, utilization of which is also monitored each quarter. the economic capital requirements for operational risk both for the Bank as a whole and for the four business divisions individually have In addition to the internal quantification model, Postbank uses the been determined using the internal capital model. A scorecard was following methods throughout the Group: developed to assess the quality of operational risk management in the business divisions so as to enable qualitative modifications I Structured capture of internal losses of €1,000 or more to the capital amounts calculated for the business divisions; this also represents a material incentive to improve operational risk I Definition of risk indicators as an early warning instrument management. As a flanking measure, the processes and methods already established were enhanced in 2009 in line with the regula I Half-yearly self-assessment to evaluate the internal control tory requirements for the AMA; scenario analysis was implemented framework in all business divisions, and an IT-based activity tracking system was established. The AMA implementation project is scheduled for I Definition of scenarios for evaluating specific risk situations completion in the first quarter of 2010. It is planned to submit the application for approval to the BaFin and Deutsche Bundesbank at I IT-based activity tracking system to reduce operational risk the end of the first quarter of 2010. The regular training of local risk managers and upgrading the soft Organization and risk strategy ware solutions deployed is also managed centrally. The “OpRisk The Management Board of the Postbank Group is responsible for the Framework” and the “Manual for Operational Risk Control in the management, control, and monitoring of operational risk. The Operational Postbank Group” describes both the methods used and the primary Risk Committee (ORC) commissioned by the Management Board defines responsibilities of those involved in the risk control process. the strategy and framework for managing operational risk. Day-to-day Postbank’s Legal Affairs department is primarily responsible for management of operational risk is the responsibility of the individual identifying and managing legal risk. units within the Group. Risk management and control Strategic parameters for managing operational risk are part of the Management of operational risk remains a key task of the individual overall strategy. The objective is to use suitable measures to limit units within the Group. operational risk to a minimum. The operational risk strategy comprises Group-wide principles relating to active security such as process For each division or subsidiary, a two-tiered organizational structure transparency, unambiguous rules regarding authorizations and powers, with decentralized OpRisk managers has been established to supplement and appropriate security guidelines on the one hand, and to passive the central risk control process and support the respective managers security in the form of appropriate emergency planning and adequate in risk prevention. financial cover on the other. In addition, the operational risk strategy was expanded to include four quantitative elements in 2009: In 2009, Deutsche Postbank Home Finance Ltd., Gurgaon, India, was fully integrated into the controlling process. This means that all areas I Establishment of a VaR limit for operational risk at the overall of the Postbank Group have now been integrated. Bank level; In 2009, the loss from operational risk amounted to €34.7 million I Allocation of economic capital for operational risk at the level of (2008: €24.3 million). The main loss driver for Postbank was external the internal business divisions; fraud, for which a significant increase was recorded as against the previous year. The main focus here was on high-frequency losses such as credit card fraud, phishing, and transfer and credit fraud. In such

82 Fiscal Year I Group Management Report I Risk Report

cases, losses are often only minor but frequent. A task force has been The Postbank Group reports regularly on operational risk and loss at set up to limit these losses and has instituted a number of measures. management level: In addition, a Bank-wide Fraud Group was set up with the express goal of reducing the loss and fraud ratio, and the related loss volume. I The members of the Operational Risk Committee (ORC) are informed One of the main focuses in the fight against fraud is to communicate on a monthly basis of losses incurred and of selected indicators all material cases of fraud in a timely manner throughout the Bank. that have exceeded the defined tolerance threshold, as well as of Another focus is on raising the awareness of the employees involved utilization levels for warning thresholds for typical losses in the in the relevant processes, in order to ensure systematic and widespread individual business divisions and utilization levels for warning For our Shareholders early identification of cases of fraud. In addition, measures are being thresholds relating to high-frequency losses. An unsere Investoren taken to adapt processes and the relevant IT systems to the change in the risk situation. I Above and beyond this, the members of the ORC are informed on a quarterly basis of the utilization of the defined VaR limits at the To date, Postbank has used the Standardized Approach for calculat level of the Bank as a whole and of the business divisions; in addition, ing the weighting required for operational risk. The weightings for they are provided with the results of the self-assessment every six operational risk are calculated for internal purposes – in contrast to months. the regulatory provisions – each quarter. The following table shows the partial weightings broken down by business segment. I The Group Management Board receives a current summary of the losses recorded each month as well as the results of the scenario Our Business Divisions Unsere Geschäftsfelder Business segment Weighting for operational risk analysis on an annual basis. in accordance with the SolvV Dec. 31, 2009 Dec. 31, 2008 I At a local level, individual managers at the various levels receive €m €m reports tailored to meet their informational needs.

Corporate finance – – ORC members and the heads of the business divisions receive ad hoc Trading and sales 6 23 reports without delay in the case of material losses that exceed a Retail banking 386 390 predefined level or of serious risks. Corporate banking 80 67

Payment transactions and processing 28 27 Our Responsibility Agency services 1 1 Monitoring and managing investment risk Asset management 5 6 Definition of risk Retail brokerage 9 9 Investment risk comprises potential losses due to fluctuations in the fair value of strategic equity investments. Total for Postbank Group 515 523 Equity investments are defined as all equity interests recognized in Risk reporting the single-entity financial statements of Deutsche Postbank AG under In fiscal year 2009, Postbank enhanced its internal operational “equity investments” and “investments in associates”, as well as risk reporting system to include quantitative elements such as the investments in companies pursuant to section 16 (2) and (4) of the utilization of the VaR limits assigned to the business divisions, as well Aktiengesetz (AktG). as additional information on, for example, AMA risk indicators and Group Management Report the results of scenario analyses. In addition, ad hoc reporting was Organization and risk strategy expanded to include additional recipients (e.g., the heads of the The Bank’s Group Management Board is responsible for strategic business divisions) and events (e.g., losses in excess of €500,000). management of the equity investment portfolio. Moreover, the members of the Fraud Group, which was set up in mid-2009, receive a monthly report on fraud trends in the Postbank The ongoing monitoring and control of investment risk within the Group. Bank is performed by various central Group units. Investment management coordinates the supervision of the business activities of subsidiaries and other investees in keeping with the investment strategy, in particular by providing support for the executive bodies. Postbank exercises influence on the business and risk policies of its

equity investments in particular through shareholder and supervisory Consolidated Financial Statements bodies, where it is usually represented by members of the Management Board.

As of the reporting date of December 31, 2009, Deutsche Postbank AG held a total of 61 direct and a large number of indirect equity investments. In fiscal 2009, the number of investments in associates/ equity investments had not changed materially over the previous year. Postbank sees these holdings predominantly as strategic Other Information investments that reflect the Postbank Group’s product and service areas, and as a source of internal services for the Postbank Group.

83 A number of these equity investments are managed as Postbank Risk reporting units. Several central functions such as accounting, finance, control In the context of the management and monitoring systems, regular ling, legal affairs, personnel, and internal audit are performed by reports are also prepared on the risk relating to the strategic equity the responsible organizational units at Postbank in some instances. investments and subsidiaries included in these systems. In addition, The relevant lending departments of Deutsche Postbank AG monitor the Postbank Group uses a variety of regular reporting instruments investment risks that have a near-credit or credit-substituting nature. for investment risk:

Deutsche Postbank AG continues to have no shareholdings in other I The key earnings figures of all subsidiaries included in the companies in the sense of a private equity or an investment strategy. consolidated financial statements are reported to Postbank’s Management Board on a quarterly basis. The Postbank Group has established procedures to ensure the adequate management and monitoring of key investment risks at Group level. I As a shareholder, Deutsche Postbank AG is also continuously These also include the interests held by Deutsche Postbank AG in spe informed about the development of the risk situation at the cial purpose entities (SPEs). In the year under review, SPEs were used respective subsidiaries at the meetings of their executive bodies in particular to issue subordinated securities and for the temporary (Supervisory Board, Administrative Board, Shareholders’ Meet- ownership of real estate. Deutsche Postbank AG has no interests in ings, etc.). SPEs designed for asset outplacement. Monitoring and managing real estate risk Consequently, all material equity investments are integrated in Definition of risk Postbank’s operational management of risk at Group level. Since Real estate risk relates to the real estate holdings of the Postbank they are included in risk monitoring at an operational level, the equity Group and comprises the risk of loss of rental income, writedowns to investments are analyzed annually for their significance and risk, and the going concern value, and losses on sale. where necessary additional equity investments are fully integrated. Organization and risk strategy Risk Controlling regularly monitors the limits of materiality defined for The Bank’s Group Management Board is responsible for strategic risks within the equity investment portfolio and keeps the Manage management of the real estate portfolio. ment Board and the Risk Committees informed of this. The ongoing monitoring and control of risks from real estate holdings Risk management and control within the Bank is performed on a uniform basis by the Real Estate Material risks (particularly market, credit, and liquidity risk) associated Management unit, which is attached to the Real Estate, Support, with strategic subsidiaries and equity investments are integrated in Security department of the Resources/Lending division. In particular, the operational and strategic Group-wide risk management and risk Real Estate Management coordinates the management of the service monitoring systems. The operational risk and business risk associated providers active in the area of facility and property management and with the majority interests are included in Postbank’s corresponding performs overarching cost coordination in line with the Group-wide management and monitoring system. The residual investment risk is real estate strategy. Real Estate Management prevents the risk of loss deducted from the available risk capital. of rental income, writedowns to the going concern value, and dis posal losses thanks to space management and the active marketing Ongoing liaison between the companies and the appropriate special of superfluous space, as well as to long-term resource allocation. ist areas of the Bank also contributes to the timely identification of business and risk developments. To this end, the equity investments The properties in the Treasury portfolio are primarily those used are allocated to the relevant board departments. by Deutsche Postbank AG and BHW Bausparkasse AG.

Equity investments are subject to an impairment test at quarterly Risk management and control intervals. In accordance with the principles for valuing equity Properties are reappraised every three to four years in order to monitor investments and shares in companies laid down by the Institut der their value on an ongoing basis. In line with the valuation principles Wirtschaftsprüfer, this review is primarily based on the application applied (in this case Practice Statement (PS) 3.2. of the RICS Valua of the Ertragswertverfahren (income capitalization approach). tion Standards (6th edition) published by the Royal Institution of Chartered Surveyors (RICS), London), the reappraisal is based primarily The large number of existing management and monitoring systems, on a determination of the market value. This is defined in the Practice which are continually being enhanced, guarantees that Postbank is Statement as follows: “The estimated amount for which a property in a position to monitor and manage shareholding risks, including should exchange on the date of valuation between a willing buyer strategic investment risks, at all times. and a willing seller in an arm’s-length transaction after marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

The real estate portfolio is monitored on the basis of the regular property valuations, which take risk aspects into account, as well as the analysis of changes in the real estate portfolio.

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No concentration risks from the real estate exposure are discernible. The complex simulation of the home savings business, which uses a large number of different parameters, derives assumptions as to the Risk reporting behavior of home savings customers given different interest rate In the context of the management and monitoring systems, regular scenarios from historical data series. This sophisticated statistical reports are also prepared on the risk relating to real estate owned by modeling could assess the relevant home savings parameters incorrectly, the Bank: resulting in adverse effects on the results of operations and net assets.

I The Real Estate, Support, Security department submits monthly The collective simulation incorporates both existing contracts and For our Shareholders reports to the board member responsible for Resources/Lending assumptions as to new business in the coming years. Material effects An unsere Investoren that are largely devoted to real estate topics. In addition, he on the medium-term results of operations would occur if actual new receives reports every two weeks on key issues relating to real business were to be significantly below the assumptions, as in this estate risk. case BHW Bausparkasse AG would have access to a reduced volume of low-interest customer funds. I The Resources/Lending board member receives reports on key indicators for real estate as part of the Group-wide KPI system. Additional risks result from the fact that BHW Bausparkasse AG’s simulation assumes that the existing home savings tariffs will remain I The Bank’s Group Management Board is informed of the size of in force. If BHW Bausparkasse AG is forced to adjust its tariffs the real estate risks as part of the quarterly risk-bearing capacity (e.g., to increase the interest it pays on deposits) as a result of market Our Business Divisions report. changes, this could lead to a deterioration in the medium-term results Unsere Geschäftsfelder of operations. Monitoring and managing collective risk Definition of risk Postbank considers the collective risks arising from its home savings The general terms and conditions of home loan and savings contracts and loan business to be material. A scenario-based model was devel provide customers with diverse options for the savings and loan phase. oped in 2009 to quantify collective risk; the results will be included in The forecast collective trend is based both on assumptions as to risk capital allocation over the course of 2010, replacing the previous trends in new business and on estimates of future behavioral patterns estimated lump-sum risk buffer. of home savings customers, derived from years of experience and Our Responsibility Our Responsibility detailed structural analyses. Factors influencing customer behavior Risk reporting range from changes in the legal framework through general economic The Postbank Group uses a variety of regular reporting instruments developments, to changes in the home savings customers’ personal for collective risk: situations. Postbank defines collective risk as the negative impact of deviations between the actual and the forecast behavior of the home I The monthly Market Risk Committee report informs the MRC of savings collective. specific business risks arising from the collective.

Organization and risk strategy I Monthly or, in some cases, quarterly reports providing an overview The Management Board is responsible for the strategic management of the development of the collective are prepared within BHW of collective risk. The handling of collective risk is a component of the Bausparkasse AG on the basis of key indicators for submission to overarching Group risk strategy. BHW Bausparkasse AG is responsible the Management Board of BHW Bausparkasse AG. Group Management Report for the decentralized operational management and monitoring of risks. BHW Bausparkasse AG’s risk control activities are integrated with I The exposure determined for collective risks is reported to the overall Bank management. Management Board in the quarterly risk-bearing capacity report.

Risk management and control BHW Bausparkasse AG uses a collective simulation model as the basis for quantifying risk. The model captures planned new contracts and expected home savings customer behavior, such as savings habits, terminations, the financing of existing housing stock, home loan maturity dates, and principal repayments. Building on the individual contracts, the simulation model uses a broad range of behavioral Consolidated Financial Statements parameters to calculate the statistically expected total cash flow and income statement/balance sheet data at the overall collective level on a quarterly basis for use in planning.

As a specialist institution, BHW Bausparkasse AG is subject to strict statutory and regulatory requirements laid down by the Bausparkassen gesetz (German Building Society Act) and the BaFin, as the relevant federal authority. The validity of the model has been confirmed by auditors Other Information and accepted by the BaFin. In addition, quality assurance in the form of backtesting and target-actual comparisons is performed annually.

85 Monitoring and managing business risk manage interest rate and liquidity risks. These scenarios are designed Definition of risk in such a way as to appropriately reflect the repricing and capital Business risk refers to unexpected declines in earnings due to unex commitment behavior of these customer products. Over time, volume pected changes in business volumes and/or margins and correspond and margin fluctuations can occur as a result of changes in the inter ing costs. They arise when expenses cannot be reduced in line with est rate adjustment policy (or as a result of a lack of opportunities a decline in income (excess fixed costs) or when expenses increase for such adjustments) which could endanger the ability to generate unexpectedly. Such declines in earnings can be caused by both stable net interest income in the long term and impair the liquidity internal and external factors, such as unfavorable economic changes situation. or political decisions leading to a change in customer behavior. The following types of risk are covered by business risk: Residual business risk is estimated by way of an earnings at risk model (EaR) with a confidence level established in the risk-bearing I Model risk capacity concept and a one-year horizon. Business risk calculation is The risk from unexpected declines in volume or falling margins based on historical variance analyses of the periods. In contrast to that cannot be fully covered by modeling customer products with VaR, which measures fluctuations in present value, the EaR model is undetermined capital commitments and/or variable interest rates. based on fluctuations in income from one period to another. In order to measure the effects caused by a fluctuation in income and expenses I Residual business risk beyond the period in question, business risk is scaled using a sustain Other unexpected volume or margin declines not covered by model ability factor. risk. This includes: Market and competition analyses are continually prepared by Control I Strategic risk ling and the business divisions in order to identify potential risks and The risk that earnings targets will not be achieved because of to develop appropriate countermeasures as part of an early warning the insufficient focus of the Group on the relevant business system. environment (which may have changed abruptly). Strategic risk may therefore result from an inadequate strategic decision- Risk reporting making process, from unforeseeable discontinuities on the market, The Postbank Group uses a variety of regular reporting instruments or from the inadequate implementation of the chosen strategy. for business risks: In the area of strategic risk, Postbank further distinguishes between internal risk, which arises from inadequate strategic I The Management Board is informed of the size of the business risk procedures, and external risk, which is caused by unexpected in the risk-bearing capacity report on a quarterly basis. market developments. I The Management Board is informed of the development of model I Reputational risk risk in the monthly risk report. The risk that the Bank will lose its good reputation in the eyes of its business partners and customers due to inappropriate I The monthly Market Risk Committee report informs the MRC of actions on the part of individuals or groups. specific business risks arising from model risk.

Organization and risk strategy I The change in volume of the customer products with unknown The Group Management Board is responsible for managing business interest rate and capital commitments is monitored via daily reports. risk. The Management Board has resolved a specific subrisk strategy for business risk based on the overarching Group risk strategy. In the I At Postbank, there are several forms of strategic risk reporting. event of strategic risk, it has a duty to take appropriate measures to For example, the Management Board receives regular reports on counteract undesirable developments as they occur. The approval of the results of the market and competition analyses, quarterly the Supervisory Board may also be required, depending on the scope reviews of business performance, and the monthly and quarterly of the strategic decision. Management Board information system reports. Additionally, strategic risk and developments are presented and discussed in Risk Controlling calculates business risk on a quarterly basis at the depth during the planning process. least; the results are taken into account in the risk-bearing capacity report as a deductible item from risk capital. The risk capital require Internal control and risk management system for the financial ments for model risk are measured monthly and are reported to the reporting process Group Management Board and the Market Risk Committee. As required by section 315(2) no. 5 of the HGB (German Commercial Code), the following section describes the features of the internal Risk management and control control and risk management system for the Group financial reporting While model risk primarily affects savings and checking account process. Postbank regards information as being material within the products in Retail Banking, it also occurs in Corporate Banking. Risks meaning of section 315(2) no. 5 of the HGB if failure to disclose it from modeling customer transactions with undetermined cash flows could influence the economic decisions taken on the basis of the result in particular from the definition of theoretical scenarios for cus consolidated financial statements and the other components of tomer products with unknown interest rate and capital commitments financial reporting. Materiality cannot always be determined in (primarily savings and checking accounts, overdrafts) in order to general terms, but is rather established in line with the issue at hand,

86 Fiscal Year I Group Management Report I Risk Report

and is assessed on the basis of the nature and scope of the issues Financial reporting is performed primarily by the departments within involved. Postbank assess the question of the materiality of an issue the Finance division, whose main tasks are as follows: by reference to its importance with respect to the consolidated financial statements. I Monitoring of new legislation,

Tasks of the internal control and risk management system relevant for I preparation and maintenance of accounting policies, financial reporting Postbank sets high standards in regard to the correct presentation of I due and proper capture and processing of data/transactions For our Shareholders transactions in its financial reporting. One of the tasks of the internal relevant for financial reporting by the IT applications, An unsere Investoren control system is to ensure due and proper financial reporting. I preparation of the consolidated financial statements and the group Postbank’s internal control and risk management system comprises management report, rules for managing corporate activities (internal management system/ risk management system) and rules for monitoring compliance with I provision of information for segment reporting. these rules (internal monitoring system). In addition, certain tasks are performed by the units in the Group Postbank’s internal control system performs the following tasks: Management division, whose main tasks are as follows: Our Business Divisions I Ensuring the effectiveness and economic efficiency of business I Coordination of the Declaration of Compliance as defined by Unsere Geschäftsfelder activities in line with the corporate strategy, section 161 of the Aktiengesetz (AktG – German Stock Corporation Act), I ensuring the propriety and reliability of both internal and external financial reporting, and I provision of certain disclosures relating to the notes,

I compliance with the legal provisions applicable to the Company. I provision of the information required to be disclosed with respect to market, credit, liquidity, and operational risks. Postbank’s Management Board has defined principles, procedures, Our Responsibility Our Responsibility and measures for implementing the tasks to be performed by the With regard to the financial reporting process, the Resources/Lending internal control system. division primarily performs the following tasks:

Organization of the internal control and risk management system I Calculation of the provisions for pensions and other employee relevant for financial reporting benefits as well as provision of disclosures relating to the notes The Management Board is responsible for preparing the annual and consolidated financial statements and for the (group) management I Decisions on specific valuation allowances relating to domestic and report. The Management Board has assigned responsibilities for the foreign loans individual components and procedural steps relating to financial reporting in the form of organizational guidelines. The Finance, Group I Provision of relevant disclosures relating to the notes and the risk Management, and Resources/Lending divisions are the main units report. Group Management Report involved in the preparation of the guidelines. The Supervisory Board supervises the Management Board. In the area Postbank prepares its consolidated financial statements in compliance of financial reporting, it is responsible for approving Postbank’s with IFRSs as endorsed by the European Union. Its financial statements consolidated financial statements. The Audit Committee set up by the are supplemented by the disclosures required by the German com Supervisory Board has the following tasks: mercial law pursuant to section 340i of the Handelsgesetzbuch (HGB – German Commercial Code) in conjunction with section 315a (1) of I Provision of advice and supervision with respect to financial the HGB and the German Accounting Standards (GASs) as well as reporting, the internal control systems, risk management and risk the sector-specific requirements for credit institutions, the legal-form control (insofar as the Loan and Equity Investments Committee is specific requirements for German stock corporations (sections 150–161 not responsible for this), internal audit (including the right to of the AktG) and the requirements of the Bank’s Articles of Association. demand information), and compliance, Consolidated Financial Statements

Consolidated subsidiaries and special purpose entities prepare reports I discussion of questions relating to the requirement of auditor at Group level (Group reporting) in accordance with the Bank’s group independence, accounting policies. I engagement of the auditors, determination of the areas of emphasis of the audit, and agreement of the fee.

In addition, Postbank’s Internal Audit unit plays a process-independ Other Information ent monitoring role. It performs audits in all areas of the Company on behalf of the Management Board and is directly assigned to the

87 Management Board, to which it also reports. In addition to reviewing manual consolidation entries and, ultimately, the generation of the the propriety and functional reliability of the processes and systems consolidated financial statements. it assesses in particular the effectiveness and appropriateness of the internal control system and of risk management in general. The entire financial reporting process is IT-based. Both standard applications and custom software are used. Rules and procedures, The consolidated financial statements and the group management which are based on the Postbank Group’s IT strategy and risk report must be audited by the auditor elected by the Annual General strategy, exist for program development and modifications, data Meeting before the consolidated financial statements are approved. backups, and access control, thus ensuring the propriety of the financial reporting. The audit report to be prepared by the auditor must be submitted to Postbank’s Supervisory Board. Integrated process controls take the form of plausibility tests within the programs and automated and manual reconciliations. The Bank Components of the internal control and risk management system regularly reconciles the general and sub-ledgers. All postings are relevant for financial reporting subject to dual control. Postbank’s control environment, as a component of its internal control and risk management system relevant for financial reporting, is the Internal Audit framework within which the rules applicable in the Postbank Group The Internal Audit unit is a key element of the Postbank Group’s are introduced and applied. It is determined by management’s basic business and process-independent monitoring system. In terms of attitude, problem awareness, and behavior towards the internal control the Bank’s organizational structure, it is assigned to the Chairman system. The control environment materially influences employees’ of the Management Board and reports independently to the Group control awareness. A positive control environment is a precondition Management Board. for an effective internal control system. Internal Audit reviews the effectiveness and appropriateness of risk Accounting policies and other rules serve to ensure the due and management in general and of the internal control system in proper treatment of business transactions; the policies and rules are particular in a risk-oriented and process-independent manner, in line reviewed on an ongoing basis and modified as necessary. Postbank with the MaRisk. In addition, it examines the propriety of all activities uses SAP for posting its ledgers. In addition, specific data processing and processes. Internal Audit audits all areas of Postbank as a matter tools are used which are controlled as a part of integrated data of principle at least once every three years. Areas that are exposed to processing monitoring. The Group reporting submitted by the companies a particular risk are audited annually. Internal Audit’s responsibilities to be consolidated are loaded into the SAP SEM system by the also extend, in a scaled-down form, to the subsidiaries of the Postbank companies or entered manually in certain cases. This data together Group and the branches acquired from Deutsche Post AG. Its activities with other information provided by the companies to be included in in the subsidiaries range from control and advisory functions to the consolidation are used by the Bank to prepare its consolidated full-scale Internal Audit procedures. financial statements. Internal Audit provides for suitable audit measures in its annual audit The risk of non-compliant financial statements is addressed by the plan that are designed to assure the appropriateness of the internal issuance of guidelines. Group reporting is subject to an audit to assure rating systems, including adherence to the minimum requirements for conformity with group manuals. The quality of the consolidated use of the rating systems. financial statements is assured by the Accounting division. Procedures for the preparation of the consolidated financial statements and new Audit planning and the determination of audit cycles employ ap IFRS requirements are the subject of regular information sessions held propriate tools based on a procedure that was established a number for the subsidiaries. of years ago and that has been proven effective. A value at risk is calculated for each audit area, and this is used to determine the audit Generally applicable measurement procedures are used. The proce cycle. Risk assessments are performed on the basis of audits carried dures used and the underlying inputs are reviewed at regular intervals out and current developments in the relevant business division. This and modified as necessary. process produces a multi-year audit plan and the annual program for the following fiscal year, which Internal Audit is commissioned to The core principle behind the design of these processes is the clear implement by the Management Board. separation of irreconcilable activities. The principle of dual control plays a key role here. Dual control is exercised over all postings of Regularity audits and system examinations are conducted regularly as transactions entailing technical and/or organizational separation. part of the annual program. Internal Audit also carries out special ex aminations under particular circumstances, and performs audit and con The financial reporting process for the annual financial statements sulting activities for the introduction and implementation of material comprises technical support for the business transactions, data capture projects. A separate process was set up in the course of the fiscal year and processing, reporting, and publication of the components of to determine the materiality of projects. Audit concepts are continu financial reporting. In addition, preparation of the consolidated ously adapted to reflect current changes in the Group and in the legal financial statements comprises in particular determining the basis of situation. For instance, new products, changes in the internal control consolidation, the reports by companies included in consolidation, system, or organizational changes in the way audits are performed are intercompany reconciliations, currency conversion, automated and all taken into account, as are any changes in the legal framework.

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Remuneration systems competitive services. This also relates to the cooperation agreements In its Circular 22/2009 dated December 21, 2009, the BaFin laid down between Deutsche Post AG and Deutsche Postbank AG as well as new criteria for banks’ remuneration systems. between Deutsche Post AG and the business parcel service marketed by DHL Vertriebs GmbH. The Postbank Group’s remuneration systems have been adjusted to comply with the general requirements specified in the Circular. The Deutsche Postbank AG and Deutsche Post AG hold that the new in adjustments will take effect in 2010. The remuneration systems are in vestigation lacks any factual basis. All public transfers associated with keeping with the goals laid down in the strategies and are designed the privatization of Deutsche Bundespost, the public guarantees and For our Shareholders in such a way that negative incentives are avoided. Employees are the funding of pension obligations formed part of the subject matter An unsere Investoren remunerated appropriately for their tasks and responsibilities; the of the state aid procedure closed by the decision of June 19, 2002. remuneration systems are reviewed annually for appropriateness. That decision did not identify the measures concerned as incompat ible state aid. Deutsche Postbank AG and Deutsche Post AG are With respect to the specific requirements placed on remuneration further of the opinion that the statutorily granted exclusive rights and systems for managing directors and employees in high-risk positions, the regulated letter prices do not fulfill the legal criteria to be consid the remuneration systems are designed in such a way as to provide ered a form of state aid in the first place. Deutsche Postbank AG also even greater support for sustainability-oriented enterprise goals. shares the opinion of Deutsche Post AG that the internal allocation of Postbank intends to implement these changes by April 2010, insofar costs with its subsidiaries is consistent with EU state aid rules and the as this is possible under civil, employment, and company law. case law of the European Court of Justice. Nonetheless, based on an Our Business Divisions overall appraisal the possibility of the Commission finding a case of Unsere Geschäftsfelder Pending proceedings incompatible state aid cannot be ruled out. An allegation made by the Monopoly Commission is the subject of a request for information submitted to the German federal government by the European Commission in response to a complaint from a third party. The allegation is that Deutsche Post AG contravenes the prohibition on state aid enshrined in the EU Treaty by allowing Deutsche Postbank AG to use Deutsche Post outlets at below market rates. In the opinion of Deutsche Post AG and Deutsche Postbank AG, Our Responsibility Our Responsibility this allegation is incorrect and the fee paid by Deutsche Postbank AG complies with the provisions on competition and state aid stipulated in European law.

The European Commission also asked the Federal Republic of Germany to comment on the sale of its entire interest in Deutsche Postbank AG to Deutsche Post AG concluded in 1999. However, the Commission had already investigated the acquisition of Postbank as part of the state aid legal proceedings concluded by the decision of June 19, 2002. At the time, it explicitly concluded that the acquisition of Postbank involved “no grant of state aid”. Group Management Report

The German government has already argued before the European Commission that the allegations are in its opinion unfounded. Never theless, with regard to the two allegations relating to the requests for information, no assurance can be given that the Commission will not find that the facts of the case constitute state aid.

On September 12, 2007, the European Commission initiated a formal investigation against the Federal Republic of Germany concerning possible subsidies to Deutsche Post AG. The investigation will focus on whether Germany, using state resources, overcompensated Consolidated Financial Statements Deutsche Post AG or its legal predecessor Deutsche Bundespost POSTDIENST for the cost of providing universal services between 1989 and 2007 and whether the Company was thereby granted state aid incompatible with EU law. According to the decision opening the investigation, the Commission intends to examine all public transfers, public guarantees, statutorily granted exclusive rights, the price regulation of letter mail services, and the public funding of pensions for civil servants during the period in question. Also to be investigated Other Information is the cost allocation within Deutsche Post AG and its predecessor between the regulated letter service, the universal service and

89 I Report on Expected Developments cash-for-clunkers program is emerging. At 2.2 %, GDP growth in Germany is nevertheless expected to be significantly higher than in the euro Global economy zone as a whole thanks to the momentum generated by foreign trade. At the beginning of 2010, the global economy is going through a In 2011, the expiration of the government’s economic recovery fragile recovery process. This recovery is being underpinned to a programs and the weakening pull of the global economy will result substantial degree by extremely expansive monetary policies and an in a light slowdown in economic growth. array of sweeping government programs. For this reason, it is not yet possible to say that the recovery is self-sustaining and the risk Markets that economic momentum will soon abate is accordingly higher. As a In 2010, central banks may move forward with their efforts to end result of these factors, we are rather cautious in our estimations about their highly expansive monetary policies. The initial focal point should economic growth. At 3.5 %, global economic output may increase at a be their retreat from unconventional measures, including the direct slower pace in 2010 than it did in the years that preceded the crisis. purchase of securities and long-term refinancing activities. We expect In 2011, growth of global GDP may be somewhat slower than in the the U.S. Federal Reserve to announce its first interest-rate increase at current year. mid-year. The key U.S. interest rate should climb to 1 % by the end of 2010. As a result of a modest recovery in the economy and continuing In the United States, it appears that the economic recovery will con high level of price stability, the ECB should have enough leeway to tinue in 2010. Investments in machinery, equipment and residential keep its key interest rate at today’s very low level of 1 % somewhat construction should rise from a very low base level. Private consump longer. For that reason, we expect an interest rate increase of 1.5 % tion will most likely be somewhat weak. The continuingly high levels in the euro zone in the final quarter of 2010. of household debt and the initial further rise in unemployment that is likely may slow momentum noticeably in this area. From today’s The continued economic recovery and a normalization of inflation perspective, foreign trade – unlike previous years – is not expected to rates should initially produce higher yields in large currency regions generate further expansive energy overall. At 2.1 %, GDP growth may during the first half of the year. The yield of 10-year German bunds be rather modest in 2010 as a result. For 2011, we expect growth to could rise up to 3.75 %. As the year proceeds, though, the economic slow somewhat as the impact of the government stimulus programs slowdown that we expect could trigger an opposite reaction in recedes. long-term yields. Because key interest rate increases in the euro zone will most likely be small, we anticipate a slight flattening of the yield The Japanese economy may profit from the rebound in world trade, curve for the entire year of 2010. By historical standards, however, with exports expected to rise considerably. As the economy picks up, it will still remain very steep. private households may increase their consumption once again. At 1.7 %, GDP should grow at a solid pace. As a result of a slowdown The decline in risk premiums for corporate bonds may continue in in foreign trade, however, GDP growth in 2011 should decline consi 2010, at most at a significantly slower rate. Moreover, the risk of a derably. In China, economic growth in 2010 is expected to remain at setback in corporate spreads will rise alongside the expected eco a high level. But if the government steps in to prevent the economy nomic fluctuations. We expect no unequivocal trend here overall. from overheating, growth in 2011 should slow measurably. Sector outlook The euro zone’s economy is expected to rebound in 2010, fueled by During their Pittsburgh summit in September 2009, the G-20 countries exports and gross capital expenditures. Against the backdrop of an agreed on a series of requirements for banks that are designed to expected initial rise in unemployment and weak wage growth, private lower the probability of future financial crises. In addition to a long-range consumption will amount to hardly more than stagnation. The mo toughening of requirements governing the quality of capital, another mentum generated by exports and gross capital expenditures could key decision involves the introduction of an upper limit on the diminish once again as the year proceeds if the support provided by leverage ratio. Limits on the leverage ratio, which reflects the ratio of the economic recovery programs diminishes. For that reason, we are total assets to equity, are primarily used by Anglo-Saxon countries. expecting moderate GDP growth of 1.7 % for 2010. A slowing global Depending on the design, such upper limits could have a significant economy and increasing pressure to consolidate government budgets impact on German banks if they are introduced. In contrast to other will likely mean a slight increase in GDP growth in 2011. countries, bank-oriented financing plays a significant role in Germany. In particular, German banks with a high amount of retail and Economic outlook for Germany corporate banking generally have a relatively high leverage ratio The German economy, because it is export-oriented, should receive a while maintaining comparatively good balance-sheet quality on the considerable boost from the global recovery in 2010. Exports should asset side. This ratio can be substantially lowered only by increasing grow significantly faster than imports. As a result, foreign trade will bank equity or reducing the number of loans issued. For this reason, a make a measurable contribution to GDP growth. Amid these conditions, significant macroeconomic impact on lending cannot be ruled out if investments in machinery and equipment should rise from a low level. a firm upper limit on the leverage ratio is introduced. On the other Furthermore, the government’s infrastructure program will produce hand, a leverage ratio used as an additional regulatory indicator in terms its full impact in 2010. Combined with moderate growth in residential of Pillar II of Basel II could make it possible to identify undesirable construction, this will result in a modest recovery in construction trends at individual banks. Generally speaking, possible regulatory investments. But private consumption is not expected to generate any changes could have a significantly negative impact on the banking momentum. First, the unemployment rate is likely to rise. And, second, industry and Postbank. At the moment, it is not yet clear when and to a negative rebound effect resulting from the German government’s what extent the much-discussed changes will be put into effect.

90 Fiscal Year I Group Management Report I Report on Expected Developments

In particular, substantial tightening of capital requirements could Expected financial situation result in a diminished ability to generate revenues as well as additional needs for capital and, thus, a reduction in the return on equity. In its Investment focuses of Postbank planning, Postbank assumes that tougher requirements governing As part of the “Postbank4Future” (P4F) strategic program, the Bank available capital resources and the leverage ratio will be introduced in is investing in the expansion and modernization of its sales channels a measured way in consideration of the business models and over a as well as in the optimization of customer systems. Postbank continues period of three years. to work on expanding its network of ATMs, both with partners and through the development of its own ATM locations. Customer service For our Shareholders Despite the obvious signs of a moderate economic recovery, the is being further improved by the installation of multifunctional machines An unsere Investoren business climate for German banks in 2010 can be described as only in the branches. The implementation of legal requirements like somewhat positive. Many banks may indeed be able to continue in consumer-loan regulation, the flat tax and SEPA as well as the area creasing their net interest income because they are profiting from the of reporting remain the focal point of investments. The optimization steepness in the yield curve. But the continuing low level of interest of processes and systems will be a key focus of investments in 2010 rates poses a challenge in terms of net interest income for deposit- as well. In addition, we are investing in the integration of the new rich banks like Postbank. This challenge must be met by further transaction banking client HSH Nordbank as well as in the scheduled reductions in interest expenses. A flattening of the yield curve could replacement of software applications. restrict the previously described opportunity to generate additional net interest income. A sudden withdrawal of the massive amounts Goals of Postbank Our Business Divisions of liquidity provided by central banks could trigger reactions on Unsere Geschäftsfelder money and capital markets, dealing a blow to the spreads of banks, Expected development in fundamental business divisions governments and companies. There is also a threat that the financial As part of a review of its strategic positioning at the end of 2009, crisis could generate a debt crisis and/or high inflation rates in some Postbank undertook a series of steps that are designed to underpin countries. Markets and economies have not yet entered a phase of the Bank’s good competitive position in the German retail market stability. Our current outlook assumes that no major setbacks or in 2010, 2011 and beyond, as well as to expand the fields of core disruptions will occur. products.

However, in terms of the risk of further loan defaults among retail One particular focal point of the “Postbank4Future” strategic Our Responsibility Our Responsibility and institutional customers, additions to allowances for losses on program is Retail Banking. The agreed-upon measures are designed loans and advances may remain high at first among the majority of to sharpen the Bank’s profile in terms of products and sales. The banks and absorb at least a portion of the potential gains in net inter objective is to ensure that the Bank is once again increasingly seen as est income. A significant reduction of allowances for losses on loans a leading provider in checking accounts, savings programs, private and advances to the respective pre-crisis levels cannot be expected to mortgage lending, home savings and private retirement provision. occur for the time being. Risks continue to exist in the international The core elements are a product range that not only has been commercial real estate business, particularly in such instances when simplified, but is also systematically tailored to meet customer needs, follow-up financing in international market segments can be arranged a focus on the sales channels of selected product fields as well as the only at a considerably reduced price level. This can have a negative continued expansion of customer service through such steps as the impact on both the allowances for losses on loans and advances expansion of the cash provision network, a reduction of processing of the participating banks and on price trends in the affected real times and optimization of complaint management. Group Management Report estate markets, putting a tremendous strain on the banks’ earnings situation. By streamlining the product range and systematically integrating overhead functions, we expect to be able to tap efficiency potential in As a result of the expected challenging capital market climate, pro- the areas of personnel and non-personnel costs. prietary trading and investment banking may generate rather small contributions to earnings. In addition, there is a risk that individual Our portfolio of retail customer loans now consists primarily of banks will still have to take writedowns on toxic securities. For this mortgage loans in Germany with a high share of owner-occupied real reason, a majority of German banks may be able to achieve only estate that serves as collateral for us. Against the backdrop of the moderate growth in their operating earnings. difficult macroeconomic conditions, the portfolio of retail banking loans has proven to be relatively stable. As a result of economic

In years to come, long-term revenues of many banks may remain related reasons, we slightly increased allowances for losses on loans Consolidated Financial Statements below the levels of recent years as a result of the economy’s weak and advances in 2009. We expect that a moderate need for additional growth rates. The expected toughening of regulatory requirements increases will arise in 2010 and 2011 as well. for banks could negatively impact the long-range recovery process of the sector as well. The measures that have been introduced are designed to produce a slight, but sustainable increase in revenues in the Retail Banking The three-pillar structure of Germany’s banking landscape is likely division – despite continuing intense competition and the related pressure to remain in place. No cross-pillar consolidation efforts are in sight. on margins as well as the low money- and capital-market rates that Mergers of the Landesbanks (or public-sector banks), some of which have an overall negative effect on deposit-rich institutions. Other Information have been battered by the global financial-market crisis, are also nowhere on the horizon.

91 In the Corporate Banking division, “Postbank4Future” will not result Expected results of operations at the Postbank Group in any noticeable changes in the strategic direction. Here, we will In 2010 and 2011, the global economy is expected to experience a continue to concentrate on intensifying our business relationships slight recovery. The effects of the multifaceted stimulus programs with our approximately 30,000 corporate customers. introduced by governments are expected to continue. Business conditions on capital markets are likely to remain fragile. Because business The centerpiece of this effort is the cross-selling of products and services bankruptcies are expected to remain at above-average levels and to customers who primarily conduct payment transactions with us. conditions on international real estate markets are likely to remain Given the relatively good liquidity situation, we were able in the past challenging, the need for allowances for losses on loans and advances two years to significantly expand the lending business we conduct in the banking industry will probably remain high. The following with our corporate customers who are largely situated in Germany. estimation of Postbank’s probable direction uses a basis scenario. We expect that the loan portfolio of this group of customers will grow It does not include the possible effects of potentially severe setbacks in coming periods as well, albeit at rates below those achieved in and disruptions on international capital and real estate markets past years. However, a significant tightening of regulatory conditions detailed in the section on the sector outlook. could have a negative impact on this business. Postbank is well positioned to meet existing challenges, with a In the area of commercial real estate loans, which is part of Corporate continuing good development in its operating earnings, its stable and Banking’s business activities, we will concentrate on selected financing sustainable revenue streams from its customer business as well as its packages with existing customers and high collateral in response solid refinancing base. The concentration of the business model on to the persistently difficult conditions involving new business in the retail, business and corporate customers that has been initiated will international real estate business. For this reason, growth rates in this be systematically continued. In this effort, the “Postbank4Future” portfolio will be significantly below those generated in past years. strategy program will generate valuable momentum toward improv ing the market position, particularly in Retail Banking. The Bank will Given the continuing uncertainties about the macroeconomic situation, maintain its strategy of lowering capital market risks and portfolios it is expected that there will be a larger need for allowances for losses in future quarters. on loans and advances in the Corporate Banking division than was the case in pre-crisis years. These expectations apply in particular to Given the expected trends in the Bank’s customer business and the area of commercial real estate loans where we foresee a higher external economic environment, we foresee a slight rise in the core need for allowances for losses on loans and advances particularly in operating earnings components of net interest income and net fee 2010 – albeit under the level of 2009. Depending on economic devel and commission income during the ongoing fiscal year and 2011 opments, this situation should normalize beginning in 2011. despite the persistently low levels of interest rates and the slowly rising transaction volume in the securities and fund business. Here, si Thanks to the good volume being generated in Corporate Banking gnificant growth momentum will be generated by net interest income, and the past successes achieved in the intensification of customer while the net fee and commission income may experience a moderate relationships as well as the expected lessening of negative effects decline and then move laterally as a result of structure-driven declines caused in this segment by the financial market crisis, we expect in revenues generated by the postal business in our branches and revenues in this division to grow at satisfying levels in 2010, 2011 from external transaction banking in 2010. and beyond. As part of our strategy program, we will once again intensify our In Transaction Banking, Postbank is optimally prepared for future cost management substantially. In this work, we will focus on both challenges related to modern, efficient processing thanks to its state- non-personnel and personnel cost centers. Given the expected gains of-the-art IT platform for domestic, SEPA and international payment in efficiency generated by the streamlining of our product range and transactions. The integration of the newly acquired customer HSH by the consolidation of overhead functions, we expect that, by 2012, Nordbank is expected to gradually generate positive momentum for we will be able to reduce the workforce in a fair manner by about the earnings situation. At the same time, it is to be expected that the 2,000 employees to a total of 19,000. Overall administrative costs integration of payment transactions that to date we have handled for should then be lowered by about 5 % by 2012 compared with 2008, Dresdner Bank into Commerzbank will result in the loss of a customer as announced in the strategy program. over the midterm. Steps to reduce the associated pool of costs have already been initiated. Overall, we expect revenues in this division to Trends in net trading income and net income from investment decline through 2011. But we also anticipate that this decrease will securities will be influenced to a large extent by developments in the be almost completely offset by successful cost management. money and capital markets as well as – based on the negative effects recorded in our structured loan portfolio – by the economic situation The main responsibilities of the Financial Markets division will continue and by the number of business insolvencies. Should macroeconomic to involve effective risk management for the entire Postbank Group. trends not deviate noticeably from expectations, the overall negative Following the challenging years of 2008 and 2009, the continued impact on net trading income and net income from investment optimization of our portfolio structure and systematic deleveraging securities should be significantly less in future quarters than in 2008 will be the primary concerns in this area for 2010 and beyond. and 2009, resulting in improvements in these income-statement items. This trend could be upset by several factors, including defaults and downgrades of individual issuers with broad impact, even in an otherwise intact market situation.

92 Fiscal Year I Group Management Report I Report on Expected Developments

For the allowance for losses on loans and advances, we foresee a level that continues to exceed that of pre-crisis years, particularly as a result of prolonged difficult business conditions in international real-estate markets. In the area of commercial real estate lending, we expect measurable – albeit lower – negative effects in 2010 than in 2009. From today’s perspective, these negative effects should significantly decline in 2011. For our Shareholders Based on our current normal scenario, the allowance for losses on An unsere Investoren loans and advances should remain at a relatively moderate level in future quarters compared with other banks. In this area, Postbank is profiting to a large extent from its Germany-based, highly collatera lized private mortgage loans.

In summary, we expect that extraordinary effects from fiscal years 2010 and 2011 as well as in future quarters may decline gradually from the levels experienced in the two previous years. On the basis of solid revenue streams from customer business and systematic cost Our Business Divisions management, we should be able to generate positive results once again. Unsere Geschäftsfelder

Over the mid and long term, Postbank continues to strive for an operating return on equity after tax of about 13 %. Our Responsibility Our Responsibility Group Management Report Consolidated Financial Statements Other Information

93 Fiscal Year I Consolidated Financial Statements I Consolidated Statement of Comprehensive Income

Consolidated Financial Statements in accordance with International Financial Reporting Standards for the period ended December 31, 2009

95 Consolidated Statement of Comprehensive Income for the Period January 1 to December 31, 2009

96 Consolidated Balance Sheet as of December 31, 2009

97 Statement of Changes in Equity

98 Consolidated Cash Flow Statement

100 Notes

133 Segment Reporting (Note 40)

164 Auditors’ Report

94 Fiscal Year I Consolidated Financial Statements I Consolidated Statement of Comprehensive Income

I Consolidated Statement of Comprehensive Income for the Period January 1 to December 31, 2009 Consolidated Income Statement

Note 2009 20081 €m €m For our Shareholders An unsere Investoren Interest income (7) 7,987 9,938 Interest expense (7) – 5,582 – 7,443 Net interest income (7) 2,405 2,495 Allowance for losses on loans and advances (8) – 678 – 498 Net interest income after allowance for losses on loans and advances 1,727 1,997 Fee and commission income (9) 1,614 1,683 Fee and commission expense (9) – 285 – 252 Net fee and commission income (9) 1,329 1,431 Net trading income (10) – 498 – 389 Our Business Divisions Net income from investment securities (11) – 148 – 1,249 Unsere Geschäftsfelder Administrative expenses (12) – 2,864 – 2,969 Other income (13) 187 218 Other expenses (14) – 131 – 103 Loss before tax – 398 – 1,064 Income tax (15) 475 179 Profit or loss from ordinary activities after tax 77 – 885 Minority interest – 1 – 1 Our Responsibility Our Responsibility Consolidated net profit or loss 76 – 886

Basic earnings per share (€) 0.35 – 5.26 Diluted earnings per share (€) 0.35 – 5.26

Condensed Statement of Comprehensive Income Income tax recognized directly in comprehensive income is attributable exclusively to the revaluation reserve. 2009 20081 €m €m Earnings per share are calculated by dividing the consolidated net Group Management Report profit/loss by the weighted average number of shares outstanding Profit or loss from ordinary activities during the fiscal year. The average number of shares outstanding in after tax 77 – 885 fiscal year 2009 was 218,800,000 (previous year: 168,567,000). Other comprehensive income after tax 222 – 168 The diluted earnings per share are the same as the basic earnings per Change in revaluation reserve 305 – 202 share because, as in the previous year, no conversion or option rights thereof remeasurement gains/ are outstanding, and hence there is no dilutive effect. The Manage- losses 106 – 979 ment Board will propose to the Annual General Meeting that – as in thereof disposals and impairment 199 777 the previous year – no dividend be paid for fiscal year 2009. Change in currency translation reserve – – Consolidated Financial Statements Income tax relating to other comprehensive income – 83 34 Total comprehensive income for the period attributable to minority interest – 1 – 1

Total comprehensive income 298 – 1,054 Other Information

112 1Prior-period figures restated (see Note 6)

95 Fiscal Year I Consolidated Financial Statements I Consolidated Balance Sheet I Statement of Changes in Equity

I Consolidated Balance Sheet as of December 31, 2009

Assets Note Dec. 31, 2009 Dec. 31, 20081 €m €m

Cash reserve (16) 4,534 3,417 Loans and advances to other banks (17) 14,467 18,684 Loans and advances to customers (18) 111,043 105,318 Allowance for losses on loans and advances (20) – 1,641 – 1,323 Trading assets (21) 20,471 16,573 Hedging derivatives (22) 520 474 Investment securities (23) 72,359 83,058 Intangible assets (24) 2,368 2,371 Property and equipment (25) 838 879 Investment property (26) 73 73 Current tax assets (27) 280 162 Deferred tax assets (27) 552 863 Other assets (28) 745 670

Total assets 226,609 231,219

Equity and Liabilities Note Dec. 31, 2009 Dec. 31, 20081 €m €m

Deposits from other banks (29) 39,318 62,790 Due to customers (30) 131,988 117,472 Debt securities in issue (31) 16,722 16,342 Trading liabilities (32) 22,434 16,987 Hedging derivatives (33) 2,051 2,693 Provisions 2,148 2,138 a) Provisions for pensions and other employee benefits (34) 1,104 1,149 b) Other provisions (35) 1,044 989 Current tax liabilities (36) 174 192 Deferred tax liabilities (36) 305 1,091 Other liabilities (37) 711 826 Subordinated debt (38) 5,507 5,736 Equity (39) 5,251 4,952 a) Issued capital 547 547 b) Share premium 2,010 2,010 c) Retained earnings 2,614 3,278 d) Consolidated net profit/loss 76 – 886 Minority interest 4 3

Total equity and liabilities 226,609 231,219

112 1Prior-period figures restated (see Note 6)

96 Fiscal Year I Consolidated Financial Statements I Consolidated Balance Sheet I Statement of Changes in Equity

I Statement of Changes in Equity

Issued Share Retained Currency Revaluation Consoli- Equity Minority Total capital premium earnings translation reserve dated before interest For our Shareholders

reserve net profit/ minority An unsere Investoren loss interest €m €m €m €m €m €m €m €m €m

Balance at Jan. 1, 2008 410 1,160 3,502 –149 – 556 856 5,223 2 5,225 Dividend payment – 205 – 205 – 205 Changes in retained earnings 856 – 856 0 0 Capital increase 137 850 987 987 Total comprehensive income Our Business Divisions

Jan. 1 – Dec. 31, 2008 – 168 – 821 – 989 1 – 988 Unsere Geschäftsfelder IAS restatement – 2 – 65 – 67 – – 67 Treasury shares – – – Other changes – – –

Balance at Dec. 31, 2008 547 2,010 4,153 – 151 – 724 – 886 4,949 3 4,952 Dividend payment – – Changes in retained earnings – 886 886 0 0 Our Responsibility Our Responsibility Total comprehensive income Jan. 1 – Dec. 31, 2009 222 76 298 1 299 Treasury shares – – – Other changes – – –

Balance at Dec. 31, 2009 547 2,010 3,267 – 151 – 502 76 5,247 4 5,251

Total comprehensive income includes measurement and disposal gains and losses on available-for-sale financial instruments.

A more detailed disclosure of the changes in the revaluation reserve Group Management Report can be found in Note 39.

Postbank did not hold any treasury shares as of December 31, 2009. Consolidated Financial Statements Other Information

97 I Consolidated Cash Flow Statement

Note 2009 20081 €m €m

Consolidated net profit/loss 76 – 886

Non-cash items in consolidated net profit/loss and reconciliation to cash flow from operating activities Depreciation and writedowns of property and equipment, writedowns of investment securities, loans and advances, and reversals of impairment losses on these items 1,046 1,224 Changes in provisions (34), (35), (36) – 794 84 Changes in other non-cash items 473 486 Gains/losses on disposal of property and equipment and investment securities – 101 627 Other adjustments (net, primarily net interest income) – 1,984 – 2,479

Subtotal – 1,284 – 944

Changes in working capital after adjustment for non-cash components Loans and advances to other banks 3,866 5,645 Loans and advances to customers – 5,978 – 12,833 Trading assets – 4,395 – 7,304 Hedging derivatives with positive fair values – 381 – 2,862 Other assets 118 – 499 Deposits from other banks – 23,264 1,653 Due to customers 14,512 6,787 Debt securities in issue 426 6,869 Trading liabilities 5,416 11,399 Hedging derivatives with negative fair values – 547 1,805 Other liabilities – 101 – 9 Interest received 8,470 9,745 Interest paid – 5,815 – 7,426 Dividends received 0 44 Income taxes paid – 234 14

Net cash from/used in operating activities – 9,191 12,084

112 1Prior-period figures restated (see Note 6)

98 Fiscal Year I Consolidated Financial Statements I Consolidated Cash Flow Statement

Note 2009 2008 €m €m For our Shareholders An unsere Investoren

Proceeds from the disposal of Investment securities 12,892 27,586 Investments in subsidiaries (2) 5 1 Property and equipment 1 12 Intangible assets 2 2 Payments to acquire Investment securities – 2,273 – 40,183 Investments in subsidiaries – 9 – 23

Property and equipment – 43 – 54 Our Business Divisions Unsere Geschäftsfelder Intangible assets – 54 – 55

Net cash from/used in investing activities 10,521 – 12,714

Dividends paid 0 – 205 Net change in cash and cash equivalents from other financing activities – 212 900

Net cash from/used in financing activities – 212 695 Our Responsibility

Cash and cash equivalents at start of period (16) 3,417 3,352

Addition to basis of consolidation – – Net cash from/used in operating activities – 9,191 12,084 Net cash from/used in investing activities 10,521 – 12,714 Net cash from/used in financing activities – 212 695 Effects of exchange rate differences – 1 –

Cash and cash equivalents at end of period (16) 4,534 3,417 Group Management Report

Reported cash and cash equivalents correspond to the cash reserve. In addition, all income and expenses that are cash transactions but are not attributable to operating activities are eliminated. These The cash flow statement is prepared using the indirect method, under payments are recognized in the cash flows used in/from investing which net cash flow from operating activities is calculated on the activities or financing activities. basis of consolidated net profit/loss plus non-cash expenses and less non-cash income in the fiscal year. Consolidated Financial Statements Other Information

99 Table of contents

I Notes

Basis of preparation Income statement disclosures

(1) Basis of accounting 102 (7) Net interest income 113 (2) Basis of consolidation 102 (8) Allowance for losses on loans and advances 113 (3) Consolidation methods 104 (9) Net fee and commission income 114 (4) Accounting policies 104 (10) Net trading income 114 (a) Active market 104 (11) Net income from investment securities 115 (b) Loans and advances 104 (12) Administrative expenses 115 (c) Leases 105 (13) Other income 116 (d) Allowances and provisions for losses on loans (14) Other expenses 116 and advances, writedowns and impairment 105 (15) Income taxes 116 (e) Trading assets 106 (f) Securities lending and repurchase agreements 106 (g) Hedging derivatives 106 (h) Investment securities 107 (i) Intangible assets 108 (j) Property and equipment 109 (k) Investment property 109 (l) Other assets 109 (m) Liabilities 109 (n) Trading liabilities 110 (o) Provisions 110 (p) Currency translation 111 (q) Income taxes 111 (5) New developments in international accounting under IFRSs 112 (6) Restatement of prior-year and prior-quarter figures 112

100 Fiscal Year I Consolidated Financial Statements I Notes For our Shareholders An unsere Investoren

Balance sheet disclosures Other disclosures Our Business Divisions Unsere Geschäftsfelder

(16) Cash reserve 117 (40) Segment reporting 133 (17) Loans and advances to other banks 117 (41) Contingencies and other obligations 136 (18) Loans and advances to customers 118 (42) Fair value of financial instruments 136 (19) Total credit extended 118 (43) Revenue and expense items, gains and losses as defined by IFRS 7, and financial instruments (20) Allowance for losses on loans and advances 118 in accordance with the measurement categories

(21) Trading assets 119 as defined by IAS 39 140 Our Responsibility (22) Hedging derivatives 120 (44) Derivatives 141 (23) Investment securities 120 (45) Bonds outstanding 145 (24) Intangible assets 122 (46) Cover for bonds outstanding 146 (25) Property and equipment 124 (47) Foreclosures and compulsory administration 147 (26) Investment property 125 (48) Foreign currency volume 147 (27) Current and deferred tax assets 126 (49) Risk-weighted assets and capital ratio 147 (28) Other assets 126 (50) Risk capital 147

(29) Deposits from other banks 126 (51) Maturity structure 148 Group Management Report (30) Due to customers 127 (52) Subordinated assets 149 (31) Debt securities in issue 127 (53) Other financial obligations 149 (32) Trading liabilities 127 (54) Trust activities 150 (33) Hedging derivatives 128 (55) Employees 150 (34) Provisions for pensions and other employee benefits 128 (56) Related party disclosures 150 (35) Other provisions 130 (57) Other disclosures 157 (58) Members of executive bodies 158 (36) Current and deferred tax liabilities 130 Consolidated Financial Statements (37) Other liabilities 131 (59) Auditors’ fee in accordance with section 314 (1) no. 9 of the HGB 163 (38) Subordinated debt 131 (60) Declaration of Compliance with (39) Equity 132 the German Corporate Governance Code 163 Other Information

101 Fiscal Year I Consolidated Financial Statements I Notes

I Notes that an active market existed when valuing the relevant holdings in the third quarter (corporate bonds only) and the fourth quarter of 2009. Consequently, the fair values for these securities are no longer determined using a valuation model, but rather on the basis of Basis of preparation observable market prices.

64 Deutsche Bank announced on March 9, 2009 that it held a 25 % The management of interest rate risk, counterparty credit risk, and stake plus one share in Postbank. The shares were primarily purchased liquidity risks is described in the Risk Report section of the Group 68 in the initial phase of the transaction with Deutsche Post AG. Management Report (subsections “Monitoring and managing market risk,” “Monitoring and managing credit risk,” and “Monitoring and 79 managing liquidity risk”). (1) Basis of accounting As a listed company, Postbank AG has prepared its consolidated The disclosures on risks from financial instruments (in accordance 57 financial statements for the year ended December 31, 2009 in with IFRS 7) are presented in the Risk Report contained in the Group accordance with the International Financial Reporting Standards Management Report. (IFRSs) as adopted by the EU and the additional requirements of German commercial law under section 315a (1) of the Handels The management of the individual risk types and the disclosures on gesetzbuch (HGB – German Commercial Code). The consolidated risks from financial instruments (in accordance with IFRS 7) are 57 financial statements constitute an annual financial report within explained in the Risk Report as part of the Group Management Report. the meaning of section 37v of the Wertpapierhandelsgesetz (WpHG – German Securities Trading Act). (2) Basis of consolidation The Annex to these consolidated financial statements provides an In addition to the parent company Deutsche Postbank AG, 170 overview of the financial reporting standards applied (as of 49 (December 31, 2008: 43) subsidiaries that are presented in the December 31, 2009). following overview are included in the consolidated financial statements as of December 31, 2009. Accounting and measurement are based on the going concern principle. Income and expenses are accrued. They are recognized and recorded in the period to which they relate.

The consolidated financial statements comprise the consolidated statement of comprehensive income, the balance sheet, the statement of changes in equity, the cash flow statement, and the Notes.

Unless otherwise indicated, all amounts are shown in millions of euros (€m).

All assumptions, estimates, and assessments required for recognition and measurement in accordance with the IFRSs are in conformity with the respective Standards, are regularly reassessed, and are based on past experience as well as other factors, including expectations as to future events that appear reasonable under the given circumstances. The assumptions and estimates refer primarily to the fair value measurement of certain financial instruments, including the assessment of whether an active or inactive market exists, the recognition and measurement of provisions, and the ability to realize future tax benefits. Among other things, the estimation uncertainty associated

136 with measurement models for financial instruments is addressed in Note 42, Fair value of financial instruments. When determining the intention to hold financial instruments, business strategy and current market conditions are also taken into account. Where significant estimates were required, the assumptions made are explained in detail in the following Notes to the corresponding item. In individual cases, the actual values may differ from the assumptions and estimates made.

Postbank has observed an increase in transaction volumes on the primary and secondary markets for European government bonds, Pfandbriefe, and bank and corporate bonds. As a result, it determined

102 Fiscal Year I Consolidated Financial Statements I Notes

Consolidated companies

Name and domicile Equity (%) Equity (%) interest direct interest indirect

Betriebs-Center für Banken AG, Frankfurt am Main 100.0 BHW Holding AG, Berlin/Hamelin 100.0

Deutsche Postbank Financial Services GmbH, Frankfurt am Main 100.0 For our Shareholders An unsere Investoren Deutsche Postbank Funding LLC I, Wilmington, Delaware, U.S.A. 100.0 Deutsche Postbank Funding LLC II, Wilmington, Delaware, U.S.A. 100.0 Deutsche Postbank Funding LLC III, Wilmington, Delaware, U.S.A. 100.0 Deutsche Postbank Funding LLC IV, Wilmington, Delaware, U.S.A. 100.0 Deutsche Postbank Funding Trust I, Wilmington, Delaware, U.S.A. 100.0 Deutsche Postbank Funding Trust II, Wilmington, Delaware, U.S.A. 100.0 Deutsche Postbank Funding Trust III, Wilmington, Delaware, U.S.A. 100.0 Deutsche Postbank Funding Trust IV, Wilmington, Delaware, U.S.A. 100.0 Deutsche Postbank International S.A., Munsbach, Luxembourg 100.0

DSL Holding AG i.A., Bonn 100.0 Our Business Divisions Unsere Geschäftsfelder DSL Portfolio GmbH & Co. KG, Bonn 100.0 DSL Portfolio Verwaltungs GmbH, Bonn 100.0 PB (USA) Holdings Inc., Wilmington, Delaware, U.S.A. 100.0 PB Factoring GmbH, Bonn 100.0 PB Firmenkunden AG, Bonn 100.0 PB Spezial-Investmentaktiengesellschaft mit Teilgesellschaftsvermögen, Frankfurt am Main (TGV 1-24) 100.0 Postbank Beteiligungen GmbH, Bonn 100.0 Postbank Direkt GmbH, Bonn 100.0

Postbank Filialvertrieb AG, Bonn 100.0 Our Responsibility Postbank Immobilien und Baumanagement GmbH, Bonn 100.0 Postbank Leasing GmbH, Bonn 100.0 Postbank Systems AG, Bonn 100.0 Betriebs-Center für Banken Processing GmbH, Frankfurt am Main 100.0 BHW Bausparkasse AG, Hamelin 100.0 BHW Gesellschaft für Vorsorge mbH, Hamelin 100.0 BHW Gesellschaft für Wohnungswirtschaft mbH & Co. Immobilienverwaltungs KG, Hamelin 100.0 BHW Gesellschaft für Wohnungswirtschaft mbH, Hamelin 100.0 BHW Immobilien GmbH, Hamelin 100.0 Deutsche Postbank Finance Center Objekt GmbH, Munsbach, Luxembourg 100.0 Group Management Report Deutsche Postbank Home Finance Ltd., Gurgaon, India 100.0 Deutsche Postbank Vermögens-Management S.A., Munsbach, Luxembourg 100.0 Miami MEI LLC, Dover, Delaware, U.S.A. 100.0 PB Capital Corp., Wilmington, Delaware, U.S.A. 100.0 PBC Carnegie LLC, Wilmington, Delaware, U.S.A. 100.0 PB Finance (Delaware), Inc., Wilmington, Delaware, U.S.A. 100.0 PB Hollywood I Hollywood Station LLC, Dover, Delaware, U.S.A. 100.0 PB Hollywood II Lofts LLC, Dover, Delaware, U.S.A. 100.0 Postbank Support GmbH, Cologne 100.0 Postbank Versicherungsvermittlung GmbH, Bonn 100.0

2650 Virginia Avenue NW LLC, Dover, Delaware, U.S.A. 100.0 Consolidated Financial Statements 401 Mass Avenue Holdings LLC, Dover, Delaware, U.S.A. 100.0 Postbank Finanzberatung AG, Hamelin 23.3 76.7 PB (USA) Realty Corp., New York, U.S.A. 94.7 Postbank Immobilien und Baumanagement GmbH & Co. Objekt Leipzig KG, Bonn 90.0 VÖB-ZVD Bank für Zahlungsverkehrsdienstleistungen GmbH, Bonn 75.0 DPBI Immobilien KGaA, Munsbach, Luxembourg 10.0

A complete list of shareholdings in accordance with sections 313 and Other Information 287 of the HGB may be consulted in the electronic Bundesanzeiger (German Federal Gazette).

103 Fiscal Year I Consolidated Financial Statements I Notes

Betriebs-Center für Banken Processing GmbH was included in the Intercompany receivables and liabilities, as well as income and consolidated financial statements for the first time as of March 2009. expenses from intercompany transactions, were eliminated in accordance with IAS 27.24. Intercompany profits within the Group were Deutsche Postbank Privat Investment Kapitalanlagegesellschaft mbH eliminated in accordance with IAS 27.25. was sold by way of an agreement dated July 15, 2009. At the time of sale, the Company’s loss after tax was €19 thousand. The decon- The financial statements of the consolidated subsidiaries used to solidation led to the disposal of assets amounting to €12 million and prepare the consolidated financial statements were prepared as of liabilities and provisions amounting to €2 million. The gain on the the parent company’s reporting date. The consolidation principles are sale of €3 million is reported as net income from investments in unchanged as against the previous year. associates under net income from investment securities.

In September 2009, the companies 2650 Virginia Avenue NW LLC, (4) Accounting policies PB Hollywood II Lofts LLC, and Miami MEI LLC were included for the Unless otherwise stated in the following, all accounting policies first time in the consolidated financial statements as wholly owned remained unchanged as against the previous year. subsidiaries of PB Capital Corporation. (a) Active market As part of the optimization of the Group’s call center structures, The assessment of the accounting policies relating to financial instru- Postbank Direkt GmbH acquired the call center units belonging to ments depends on whether an active market exists for them. Under Deutsche Postbank AG and BHW Direktservice GmbH under an asset IAS 39.AG71, a financial instrument is regarded as quoted in an active deal and was included in the consolidated financial statements for market if quoted prices are readily and regularly available from an the first time in October 2009. exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring In November 2009, the companies PB Hollywood I Hollywood market transactions on an arm’s length basis. If the above criteria Station LLC, and 401 Mass Avenue Holdings LLC were included in are not met, the market is regarded as being inactive. the consolidated financial statements for the first time. (b) Loans and advances In accordance with Interpretation SIC-12 issued by the International As a rule, loans and advances to other banks and customers are Financial Reporting Interpretations Committee (IFRIC), which requires reported at amortized cost (“loans and receivables” category). the consolidation of special purpose entities under certain conditions, These also include money market receivables. two special purpose entities formed to securitize installment loans and one special purpose entity established to securitize residential Postbank applies the fair value option exclusively to specific loan construction loans were consolidated. In 2009, two of these special portfolios in the mortgage lending business that are hedged by inter- purpose entities were consolidated for the first time. The special est rate derivatives. In accordance with this, financial assets may be fund launched in the previous year was closed and deconsolidated designated at fair value through profit or loss, if this leads – among in March 2009. other things – to the elimination or significant reduction of inconsistencies in measurement or recognition (accounting mismatches). There were no other changes in the basis of consolidation. Overall, In accordance with IAS 39 AG74 ff. receivables are measured on the the changes in the basis of consolidation have had no material impact basis of the discounted cashflow process using the current swap on the net assets, financial position, and results of operations of yield curve and loan-specific risk premiums. A detailed description of the Group. the valuation technique can be found in Note 42. The receivables are presented in the balance sheet under the “loans and advances to (3) Consolidation methods customers” item. Changes in fair value are reported in net trading Complying with IAS 27.28, the consolidated financial statements income. The interest on portfolios allocated to the fair value option of Deutsche Postbank AG have been prepared in accordance with and the related interest rate swaps is reported in net interest income. uniform Group accounting and measurement policies. The maximum credit risk on the loan portfolios allocated to the fair Acquisition accounting uses the acquisition method in accordance value option is equal to the carrying amount of €8.6 billion (previous with IAS 27.22 in conjunction with IFRS 3. Recognition of the invest- year: €8.7 billion); this risk is reduced by €1.6 billion (previous year: ments in subsidiaries at their carrying amount at the parent is €2.2 billion) by credit default swaps, because these loans are part of replaced by the fair values of the assets and liabilities of the com the reference pools of synthetic securitizations and this credit risk has panies included. been placed in the market in connection with the RMBS transactions. The credit default swaps that reduce the credit risk are exclusively Any goodwill arising from initial consolidation is tested for impairment financial guarantee contracts that are accounted for under IAS 37 or once a year and written down if required. are measured only at the time of the recourse claim.

Interests in the equity of subsidiaries not attributable to the parent Impairments of loans and advances that are not designated at fair are reported in consolidated equity as “minority interest.” The value value through profit or loss are recognized separately in the allowance of such minority interest is determined on the basis of the fair values for losses on loans and advances, and deducted from assets. The of the assets and liabilities attributable to it. carrying amount of collateralized loans for which hedge accounting

104 Fiscal Year I Consolidated Financial Statements I Notes

is used is adjusted for the gains and losses from changes in fair value (d) Allowances and provisions for losses on loans and attributable to the hedged risk. advances, writedowns and impairment Identifiable credit risks are covered by recognizing specific valuation Premiums and discounts including transaction costs are recognized in allowances (or collective specific valuation allowances). Additionally, net interest income. Deferred interest on loans and advances, as well in the case of risks that have arisen but not yet been identified, as premiums and discounts, are carried together under the relevant portfolio-based valuation allowances are recognized for groups of items of loans and advances. Premiums and discounts are deferred financial assets with similar default risk profiles, the amounts of using the effective interest method. At Postbank, the categorization which are determined on the basis of Basel II parameters (expected For our Shareholders of financial instruments by classes as required by IFRS 7.6 is derived loss rates and default probabilities). The allowance for losses on An unsere Investoren from the classification of financial instruments in accordance with loans and advances is deducted from assets as a separate balance IAS 39 in connection with the relevant balance sheet items. To further sheet item. It relates to writedowns of losses on loans and increase transparency, the balance sheet items “loans and advances advances to other banks and to customers. 117 to other banks” (Note 17) and “loans and advances to customers” (Note 18) are reported broken down by product group. In addition, A potential need to recognize impairment losses is assumed in the 118 the class with the highest value, “loans and advances to customers – case of the following indicators: delinquency over a certain period, loans and receivables,” is reported broken down by product group the initiation of enforcement measures, imminent insolvency or 118 for Note 20, “Allowance for losses on loans and advances” (IFRS 7.16). overindebtedness, the application for or opening of insolvency Receivables are derecognized once the majority of the key risks and proceedings, or the failure of restructuring measures. Our Business Divisions rewards incidental to legal ownership of the financial assets have Unsere Geschäftsfelder been transferred. The measurement methods used are described in A financial asset is impaired if its estimated recoverable amount is 136 Note 42, Fair value of financial instruments. lower than its carrying amount, i.e., if a loan is presumed to be (partly) uncollectible. If this is the case, the loss on financial assets (c) Leases carried at amortized cost (IAS 39.63) must either be recognized Leases are accounted for in accordance with IAS 17 and IFRIC 4. through an indirect writedown (loan loss allowance) or by writing down the asset directly and recognizing the loss in net profit or loss In accordance with IAS 17, leased assets are allocated to and recog- (IAS 39.63). nized at the lessor or the lessee and the leases are classified as a Our Responsibility Our Responsibility finance or operating lease on the basis of the risks and rewards inci- In accordance with IAS 39.63 ff., the recoverable amount is deter- dental to ownership. mined using the following methods:

Where Postbank is the lessee in a finance lease, it carries the leased I the discounted present value of estimated future cash flows asset in the fair value amount it had at the beginning of the lease or (interest and principal payments as well as payments received at the lower present value of the minimum lease payments under from the liquidation of collateral) from the financial asset; property and equipment. The lease payments due are reported in the balance sheet under other liabilities. Writedowns of the leased I the market price, where there is an observable market price for assets are recognized in administrative expenses. the financial instrument, because marking-to-market reflects the increased counterparty credit risk. Where Postbank is the lessor of a finance lease, it discloses the Group Management Report receivable at its net investment value under loans and advances to Uncollectible loans and advances are written off directly against other banks or loans and advances to customers. The lease install- income in the appropriate amount; recoveries on loans previously ments due are recognized as interest income (interest component; written off are recognized in income. recognized in income) and deducted from the receivables reported (principal redemption component; recognized in equity). Credit risk provisions are recognized for liabilities under sureties, other guarantees, and irrevocable loan commitments involving a Postbank does not have any finance leases relating to real estate. Its default risk. leases for movable assets generally take the form of non-full payout leases with a put option. In such non-full payout leases, only part of In the year under review, certain parameters for determining port- the total investment costs is amortized within the basic term of the folio impairments and collective specific valuation allowances were

lease due to the fact that this is shorter than the standard useful life. adjusted to reflect the slowdown in the economy. Overall, the Consolidated Financial Statements adjustments led to an increased portfolio-based valuation allowance Where Postbank is the lessee of an operating lease of properties, it (€15 million) and an increased collective specific valuation allowance reports the lease installments paid in full as rental expense under (€7 million). administrative expenses.

Where Postbank is the lessor of an operating lease, it carries the leased asset at amortized cost under property and equipment. The lease installments received during the respective period are reported Other Information in other income; writedowns of the leased assets are carried under administrative expenses.

105 Fiscal Year I Consolidated Financial Statements I Notes

(e) Trading assets (g) Hedging derivatives Securities and derivatives with positive fair values acquired for the The aim of asset/liability management at the Postbank Group is to purpose of generating a profit from short-term fluctuations in market manage the Bank’s overall exposure in a way which minimizes risk prices or dealing margins are carried under this balance sheet item. while maximizing earnings, with a particular focus being placed It also contains the positive fair values of banking book derivatives on present value risk. Fair value hedges are used for this purpose. and derivatives relating to hedged items accounted for under the fair value option. These transactions are recognized for the first time at A fair value hedge is a hedge of the exposure to changes in the fair the trade date. value of financial assets and liabilities where these changes are based on market risk. They are carried at their fair values. If there are publicly quoted prices in an active market within the meaning of IAS 39.AG71 ff., these For interest-bearing securities and noncurrent receivables, the instru- publicly quoted prices are generally used as the fair value; otherwise ments used in fair value hedges are primarily interest rate swaps. the fair value is determined based on recognized valuation tech- For issues, cross-currency swaps and structured swaps are also 136 niques (in accordance with IAS 39.AG74 ff.). A detailed description employed to convert fixed-income or structured items into variable- of the valuation techniques is given in Note 42. Remeasurement rate exposures. Fair value hedges are used to hedge both individual gains and losses as well as gains or losses on the sale or disposal of items and homogeneous subportfolios. Shares are managed using trading assets are recognized in net trading income. derivatives with option features.

The interest on spot transactions and interest on swaps in portfolios Hedging derivatives relate to those hedging instruments that meet allocated to the fair value option are recognized in net interest the requirements for hedge accounting set out in IAS 39. income. All other interest on swaps is reported in net trading income. As a rule, a derivative held for hedging purposes may be allocated to Postbank has separated the embedded derivatives in the synthetic a single hedged item or to several similar hedged items. Such hedges collateralized debt obligations (CDOs) in accordance with IAS 39.AG30h are generally known as microhedges. and thus measured them separately through profit or loss. IAS 39 restricts the use of hedge accounting. Under IFRSs, hedge The separated derivatives in synthetic SCP portfolios (structured accounting may only be used for hedging relationships that meet credit products) are reported as standalone derivatives in the the requirements of IAS 39.88 ff. A hedging relationship ends when “trading assets” balance sheet item (in the case of a positive fair the hedged item or the hedging instrument expires, is sold or exer- value) or “trading liabilities” (in the case of a negative fair value). cised, or if the hedge no longer meets the criteria for qualification 107 SCP portfolios held for trading are also carried under “trading for hedge accounting. The hedge accounting criteria must be satis- assets.” Detailed explanations on SCPs can be found in Note 4 (h), fied at each balance sheet date and for each hedging relationship. Investment securities. 136 Derivatives entered into for the purposes of asset/liability management The measurement methods used are described in Note 42, Fair value and derivatives from ineffective hedging relationships do not meet of financial instruments. the conditions set out in IAS 39.88 ff., and thus are always recognized in income and disclosed at their fair value as banking book (f) Securities lending and repurchase agreements derivatives under trading assets/liabilities. These derivatives generally Postbank enters into both securities lending and genuine securities relate to interest rate swaps entered into to hedge net positions of repurchase agreements. Securities sold under repo and sell-and-buy-back receivables and liabilities. Under IFRSs, measurement gains and inter- transactions (cash sales) are carried as securities in the consolidated est income from these items are recognized in net trading income. balance sheet. Cash inflows from such transactions are carried in the balance sheet as deposits from other banks or amounts due to Effectiveness testing for all fair value hedges is performed prospec- customers, depending on the respective counterparty. These cash tively by way of a sensitivity analysis of the hedged item and the inflows are disclosed in the amount of the purchase price received hedging instrument, supplemented by homogeneity testing of the (net); prepaid expenses are recognized ratably for the repo rate to be paid. subportfolios. Actual changes in the fair values of the hedged item Interest payments are carried under interest expense. and the hedging instrument are regularly compared retrospectively for each hedging relationship. Reverse repo and buy-and-sell-back transactions (cash purchases of securities) are carried as loans and advances to other banks or loans Derivatives used for asset/liability management are entered into and advances to customers. The securities purchased are not carried primarily as microhedges (fair value hedges). If there are no effective in the balance sheet; interest arising from such transactions is carried microhedges, the changes in value of the derivatives used for asset/ under interest income. liability management are reported in net trading income in accordance with IFRSs, regardless of whether risk management was success- IFRSs only require an obligation to return the securities to be recog- ful or not from an economic perspective. New swaps taking the form nized by the borrower if the securities are passed on to another party. of microhedges (microswaps) are entered into and existing hedges The lender continues to recognize the securities. are unwound and settled as part of active management of the fixed- rate position in the overall bank balance sheet (asset/liability management). The review of the fixed-rate position and the decision to enter

106 Fiscal Year I Consolidated Financial Statements I Notes

into or unwind and settle microhedges are based on economic factors. of the third quarter and for European government bonds, Pfand The unwinding of microswaps is accounted for in the balance sheet briefe, and bank bonds in the fourth quarter of 2009, Postbank deter- and in net profit or loss for the period in the same way as for ineffec- mined that these market segments were active in connection with tive hedges. Effectiveness tests – and hence measurement in profit measuring these portfolios. Therefore, the fair values of these portfo- or loss – are performed at the end of the month. lios are no longer determined based on a valuation model but instead based on observable market prices (in accordance with IAS (h) Investment securities 39.AG71 ff.). Investment securities are composed of bonds not held for trading For our Shareholders and other fixed-income securities, equities and other non-fixed- As part of its credit substitution business, Postbank has invested in An unsere Investoren income securities, investments in unconsolidated subsidiaries, and structured credit products (SCPs). These include the following product other equity investments. categories: asset-backed securities (ABSs), collateralized debt obligations (CDOs), collateralized loan obligations (CLOs), residential mort- At the time of initial recognition investment securities are measured gage-backed securities (RMBSs), and commercial mortgage-backed at cost at the settlement date. securities (CMBSs).

Loans and receivables (LaR) portfolios are recognized at amortized To a minor extent, structured credit products are classified as held for cost in the balance sheet. trading (HfT). The accounting treatment of the SCP portfolios is determined by whether they can be classified as cash structures or Our Business Divisions Available-for-sale investment securities (AfS) are subsequently meas- synthetic structures. In the case of cash structures, the special purpose Unsere Geschäftsfelder ured at their fair values if the fair values can be reliably determined. entity itself holds receivables and/or securities in its portfolio to Changes in the fair values of available-for-sale investment securities secure the bonds that it has issued. By contrast, in the case of synthetic are recognized directly in the revaluation reserve in equity and are structures the credit risk associated with the portfolio of financial not recognized in income until the gain or loss is realized or impair- assets is usually synthetically transferred using a credit default swap ment is identified. If hedge accounting is used for these investment (CDS). Combinations of cash and synthetic structures are accounted securities, gains and losses from changes in fair value attributable for in the same way as synthetic structures. to the hedged risk are recognized directly in income. Banking book SCP portfolios with cash structures are classified as Our Responsibility Our Responsibility Postbank allocates financial instruments to the IFRS AfS category loans and receivables (LaR) in accordance with IAS 39, and those that were not acquired for selling in the near term or short-term profit with synthetic structures are classified as available for sale (AfS) in taking, that were not designated as at fair value through profit or accordance with IAS 39. In accordance with IAS 39.11, these SCP loss, and that are not to be held to maturity. The financial instruments portfolios must subsequently be assessed to determine whether a 104 are also quoted on an active market – as defined in Note 4 (a) – separable embedded derivative is present. Cash structures (LaR) do at their acquisition dates. not contain separable embedded derivatives and are accounted for as a single financial asset. By contrast, the synthetic structures (AfS) Premiums and discounts are allocated directly to the financial instru- are separated into a host contract and an embedded derivative. ments and accrued over the remaining maturity while applying the effective interest method. In the case of SCP portfolios in the banking book, the entire structured product (cash structures) and the host contract are reported in Group Management Report Writedowns are charged in the event of significant or permanent the “investment securities” balance sheet item if the embedded 106 impairment. The entity assesses at each balance sheet date whether derivative (synthetic structure) is separated (see also Note 4 (e)). there is objective evidence to impair assets, and in addition, if an impairment trigger exists. Synthetic SCPs (AfS), including the embedded derivatives and the SCPs in the trading portfolio (HfT) are measured at fair value. The fair Investments in unconsolidated subsidiaries and other equity investments value is generally measured using published transaction or market are generally carried at cost as their fair value cannot reliably be deter prices. If no transaction or market prices are available, so-called mined. Writedowns are charged in the event of permanent impairment. arranger or dealer quotes (indications) are used for the measurement. Due to the almost complete inactivity of markets for securitization For interest-bearing financial instruments, the markets were deter- products, an internal valuation model (consistent with IAS 39.AG74

mined to be inactive due to the significant widening of bid-ask ff.) with transaction-specific liquidity spreads is used to determine the Consolidated Financial Statements spreads in the course of the financial crisis and the massive decline fair values of SCPs in the AfS category (e.g. CDOs, consumer ABSs, in market liquidity, as well as the resultant significant decrease in commercial ABSs, CMBSs, and RMBSs). In accordance with IAS 39.48A, trading volume until the third quarter of 2009 for corporate bonds the valuation technique makes maximum use of market inputs. and until the fourth quarter of 2009 for European government bonds, Pfandbriefe, and bank bonds. The fair values for these securities were Changes in the fair value of SCPs in the trading portfolio are presented no longer determined using indicative prices, but instead using a in net trading income. For synthetic SCPs, changes in the fair value of valuation model that employs market data to the greatest extent the separated embedded derivatives are also recognized in net trad- possible and relies as little as possible on company-internal data. ing income. The remaining change in fair value (i.e. of the host con- Other Information Based on the increased transaction volumes observed by Postbank tract of the synthetic SCP) is presented directly in the revaluation in the primary and secondary markets for corporate bonds at the end reserve if no impairment is present. The value of the embedded deriv-

107 Fiscal Year I Consolidated Financial Statements I Notes

ative, which is determined by a market- and loss-based valuation tech- will flow to the entity and the cost can be reliably determined. nique that uses current input parameters adapted to the respective Development costs for internally generated software are capitalized market situation, is subtracted from the full fair value of the synthetic if the evidence under IAS 38.57 (a)-(f) can be provided. If the criteria SCP. for capitalization are not met, the expenses are recognized immediately in the income statement for the period when they arise. Impairment losses due to changes in credit risk are only charged in the event of permanent impairment. The existence of permanent Intangible assets with a finite useful life are amortized using the impairment is determined by certain objective evidence. IAS 39.59 straight-line method over a period of 4 to 10 years, recognized cus- gives some examples of such objective evidence, such as significant tomer relationships over a period of 25 years, and beneficial con- financial difficulty of the issuer or obligor, or a breach of contract tracts over a period of 12 years. The amortization period for intangible such as a default or delinquency in interest or principal repayments. assets with a finite useful life is reviewed at least at the end of each Postbank has expanded the objective evidence to define the presence fiscal year. Changes to expected useful lives are accounted for as of indirect subprime investments as a factor, and an impairment test changes in accounting estimates. Intangible assets with a finite use- must therefore be performed for all indirect subprime investments. ful life are reviewed at the balance sheet date as to whether there Generally, all SCP portfolios are continuously monitored. exists any indication of a possible impairment. If an indicator exists, the impairment loss is determined. The determination is made by Where such objective evidence of permanent impairment exists, the determining whether the respective carrying amount of the asset following procedure must be followed: In the case of LaR portfolios, exceeds its recoverable amount and by considering a complete write- the difference between the current carrying amount and the recover- down and/or disposal of the asset. There were no indications of an able amount is recognized as an impairment loss in the income state- impairment in 2009. Intangible assets not yet ready for use are tested ment. In the case of AfS portfolios, the negative amount from the for impairment annually. All of the intangible assets with an revaluation reserve must be reversed to the income statement. indefinite useful life recognized at Postbank are brands.

Impairment in SCP portfolios is determined by analyzing the expected The established “BHW” brand is constantly promoted through cash flows using an internal measurement model that reflects the continuous investments in advertising. Postbank intends to use this current estimates of counterparty credit risk for the underlyings in the brand name over the long term. pool designated as collateral. The default events of the underlyings were simulated over time and included in the invested tranche using Purchased goodwill is not amortized. Instead, it is tested for impair- a waterfall or counted towards the current buffer. ment to determine whether an impairment loss must be recognized (IFRS 3.54). Rating migrations and the identification of the underlyings with default events enable an analysis of certain triggers for cash CDOs. Purchased goodwill and intangible assets with indefinite useful lives Additional case-by-case analyses ensure that complex triggers, such are tested for possible impairment at the balance sheet date as reversal triggers, are taken into account. The current estimate of (impairment test in accordance with IFRS 3.55 and IAS 36). To conduct counterparty credit risk for the underlyings is based on a products/ the impairment test, the recognized goodwill and brands are allo- markets/vintage matrix, reflecting the original rating, the current cated to the corresponding cash-generating units as required by rating, and recovery expectations. IAS 36.38. For this purpose, pursuant to IAS 36.80, the operating segments in accordance with IFRS 8 are used as cash generating units. Upon measuring its structured credit portfolio following recent market The impairment test of goodwill subsequently determines whether the developments, Postbank reduced the expected realization proceeds recoverable amount exceeds the respective carrying amount of the and increased the default probabilities for corporate CDOs. This resulted cash generating unit. The recoverable amount is the higher of the in a one-time negative effect on earnings of €157 million in the value in use and the fair value less costs to sell. The same procedure fourth quarter of 2009. is used for impairment testing of brands, but the fair value less costs to sell for the brands is determined at the level of the individual asset The impairment losses are reported in “net income from investment instead of the cash generating unit. The value in use is determined securities.” Financial instruments are derecognized once the majority based on the corresponding cash flows of the cash generating unit. of the key risks and rewards incidental to legal ownership of the The fair value less costs to sell is only determined if calculating the financial assets have been transferred. value in use would result in identification of an impairment. This was

136 not the case in 2009. Value in use is calculated based on appropriate The measurement methods used are described in Note 42, Fair value projections (management approach). The planning period covers of financial instruments. three years. Following the detailed planning period, a projection using a 1 % growth rate (so-called perpetual annuity) was used. (i) Intangible assets Intangible assets are carried at amortized cost and relate primarily A pre-tax discount rate of 8.95 % was used for the measurement. to internally generated and purchased intangible assets and purchased goodwill. The discount rate consists of a risk-free interest rate of 4.25 % plus a company-specific risk premium of 4.70 %, which is calculated from Intangible assets in the Postbank Group are only recognized in an average market risk of 5.00% and the individual beta factor of accordance with IAS 38.21-23 if it is probable that the expected benefit 0.94. The individual beta factor for Deutsche Postbank AG shares is a

108 Fiscal Year I Consolidated Financial Statements I Notes

mean value of beta factors compared to the DAX 30 on the one (j) Property and equipment hand, and to the Prime All Share on the other. Compared to the pre- Property and equipment is carried at cost and reduced by deprecia- vious year, the analysis period was expanded from one year to tion over the standard useful life of the asset. Determination of the three years when determining the beta factors due to the financial useful life of an asset reflects physical wear and tear, technical market crisis. Backtesting showed there would have been no need obsolescence, and legal and contractual restraints. Writedowns are to recognize impairments as of December 31, 2009 even when using charged in the event of additional impairment. the same one-year analysis period. Property and equipment is depreciated using the straight-line method For our Shareholders With reference to IAS 36.134 (d) (ii), the recoverable amounts calcu- over the following periods: An unsere Investoren lated in the projections (segment results) are based on both historical data and assumptions about future trends in markets that are crucial Useful life (years) for Postbank’s business. The key planning assumptions with regard to economic fundamentals are based on experience and the use of Buildings 40 – 60 market models in Postbank’s Research units, as well as on product IT systems 4 –5 managers’ estimates of market trends in relation to the forecast per- Other operating and office equipment 5 –20 formance of Postbank products. In addition, estimates and models by credit risk managers that are based on these fundamentals are used Ongoing maintenance and acquisition costs of up to €150 are to assess changes in the allowance for losses on loans and advances. expensed in full as incurred. Replacement part costs for property and Our Business Divisions equipment are capitalized. Unsere Geschäftsfelder In accordance with IAS 36.134 (d) (i), the key assumptions on which management has based its projections of the recoverable amounts An omnibus item is created for low-value assets in the year of are presented below. acquisition. One fifth of the omnibus item is reversed in the year of acquisition and the four subsequent fiscal years in each case, With regard to the economic fundamentals, an average rate of reducing profit. growth in gross domestic product (GDP) was expected for the planning period 2010 – 2012; at the same time, a sharp increase (k) Investment property in unemployment was assumed. Postbank now expects a slightly IAS 40 (Investment Property) defines investment property as property Our Responsibility Our Responsibility stronger increase in GDP. The rise in unemployment is likely to be held to earn rentals and/or for capital appreciation, rather than for considerably lower than was factored into or forecast in the pro- use in the production or supply of services, for administrative purposes, jections due to the unexpectedly favorable labor market trend in or for sale in the ordinary course of business. the second half of 2009. However, management continues to expect extremely muted growth in disposable incomes in private Rental income is reported under other income. households due to the after-effects of the financial market crisis. Given a slight increase in real consumer spending and moderate IAS 40 allows an option to measure investment property at fair value rises in consumer price levels, this will lead to a downward trend or at amortized cost. Postbank has opted to measure it at amortized in the savings rate. As a result of current developments, the cost, and the necessary disclosures are contained in Note 26. The decrease in the savings rate is expected to be lower than initially depreciation method and useful life of investment property correspond forecast. At the same time, management predicts that the lending to those of land and buildings (see Note 4 (j)). The fair values are Group Management Report business will profit slightly from the sustained low interest rates determined based on internal appraisals. and that the Bank will moderately expand its portfolio of loans to retail customers. The financial market crisis will continue to sub- (l) Other assets side in the course of 2010. However, the banking sector will Prepaid expenses, the collateral received from lending, as well as all remain impacted by rising loan defaults due to the after-effects of assets not allocated to other asset items are reported under Other the crisis. assets.

The forecast changes in the relevant market parameters for savings Collateral received is measured at the lower of cost and net realiz products, the number of Postbank checking accounts, installment able value. loans, and home savings products in the Bank’s core German market, which were derived from the above-mentioned macroeconomic (m) Liabilities Consolidated Financial Statements environment, will result in only moderate overall growth in Postbank’s Liabilities and subordinated debt are carried at amortized cost business activities. As a result, management is forecasting only a (IAS 39.47). slight improvement in operating segment results in 2010 on the basis of these assumptions. The carrying amount of secured liabilities that meet the requirements for hedge accounting is adjusted for the changes in fair value attribut able to the hedged risk.

Premiums, discounts, and issue costs are recognized in net interest Other Information income by applying the effective interest method.

109 Fiscal Year I Consolidated Financial Statements I Notes

(n) Trading liabilities der Deutschen Bundespost (VAP – Postal Service Institution for Derivatives with negative fair values that were acquired for the Supplementary Retirement Pensions). purpose of generating a profit from short-term fluctuations in market prices or dealing margins are carried under this balance sheet item. Pension provisions are calculated using the following actuarial It also contains the negative fair values of banking book derivatives. assumptions in Germany: In 2009, the negative fair values of embedded derivatives increased significantly due to continuing market tensions. Remeasurement 2009 2008 gains and losses as well as realized gains and losses are recognized in net trading income. Derivatives carried under trading liabilities Discount rate 5.25 % p. a. 5.75 % p. a. are recognized for the first time at the trade date. Interest rate deriva- Salary growth 2.5% 2.5% tives relating to the hedged items accounted for under the fair value Pension growth 2.0% 2.0% option are also reported here. In addition, short sales of securities – Fluctuation 4.0% p.a. 4.0% p.a. insofar as these are permissible – are recognized at their negative Pensionable age 60–63 years 60–63 years fair value. Mortality, disability, etc. Heubeck tables Heubeck tables 2005G 2005G The separated derivatives in synthetic SCP portfolios are reported as Average expected return on standalone derivatives in the “trading assets” balance sheet item plan assets 4.25% 4.25% (in the case of a positive fair value) or “trading liabilities” (in the 107 case of a negative fair value). Detailed explanations on SCPs can be The expected return on plan assets was determined on the basis of found in Note 4 (h), Investment securities. the current long-term yields on (government and corporate) bonds. Suitable risk premiums were applied based on historical market (o) Provisions returns and current market expectations, taking the structure of the Provisions for pensions and other employee benefits plan assets into account. Occupational pensions are governed by defined benefit plans and defined contribution plans. Expenses for defined contribution plans In accordance with IAS 19.92, actuarial gains and losses are not mainly relate to payments made to Bundes-Pensions-Service für Post recognized as income or expense until the net cumulative unrecog- und Telekommunikation e.V. (special pension fund for postal civil nized actuarial gains or losses at the end of the previous reporting servants) in the amount of € 115 million (previous year: € 115 million) period exceed the greater of 10% of the present value of the defined and the statutory employer’s contributions to the pension insurance benefit obligation or of the fair value of plan assets at this time. in the amount of € 57 million that are recognized in administrative The excess amount is amortized over the remaining working lives of expenses. The defined benefit plans are funded by external plan the active employees and recognized in income. assets and provisions for pensions and other employee benefits. The total defined benefit obligation for defined benefit plans corresponds Other provisions to the present value of pension entitlements earned at the valuation Other provisions comprise obligations that must be recognized in date. This figure reflects expected compensation increases and accordance with IAS 37 or IAS 19 (excluding pension obligations). forecasted pension growth and was calculated on the basis of actu- In accordance with IAS 37.36, the amount recognized as provisions is arial reports in accordance with IAS 19. Pension obligations and pen- the best estimate of the expenditure required to settle the present sion expenses are calculated using the projected unit credit method. obligation. Provisions resulting in cash outflows after 12 months are The agreements underlying the pension obligations provide for a recognized at their present value where the time value of money is range of benefits, depending on the different groups of beneficiaries significant. This applies in particular to provisions in the home savings concerned, such as: business. These are discounted at rates valid on the balance sheet date with maturities and yields that match those of Bundeswertpapiere I old-age pensions starting at age 62 or 63, or for the severely (Federal Government securities). Interest unwinding during the year disabled at age 60 at the earliest, under review is reported in net interest income.

I disability pensions in the case of incapacity to work or a reduction Provisions for uncertain obligations, for the reimbursement of in earning capacity, arrangement fees, and for interest premiums payable retroactively in the case of unutilized loans, or of changes in interest rates or tariffs, I surviving dependents’ pensions. are recognized for the home savings business in line with the different tariffs and contract terms. These provisions are calculated as a Pension obligations primarily reflect direct pension commitments. percentage of the total potential liability, based on the statistical The nature and amount of the pension payments of those employees data available relating to customer behavior and taking into account entitled to pension benefits are governed by the applicable pension the general environment likely to affect the business in the future. rules (including pension guidelines and pension fund rules), which depend largely on the duration of the employment. Additions to provisions for interest premiums and changes in interest rates are reported in net interest income, while provisions established Postbank has assumed a direct occupational pension commitment for the reimbursement of arrangement fees are charged to net fee for pensioners and employees admitted to the Bank’s occupational and commission income. pension plan who were previously insured with Versorgungsanstalt

110 Fiscal Year I Consolidated Financial Statements I Notes

(p) Currency translation In accordance with IAS 21.23, all foreign currency monetary items and equities denominated in foreign currencies that are classified as nonmonetary items in accordance with IAS 21.8 are translated into euros at the middle spot rate at the balance sheet date. There were no material nonmonetary items at the balance sheet date measured at (amortized) cost (in particular property and equipment, prepaid expenses, and deferred income) and translated at the historical rate For our Shareholders in accordance with IAS 21.23(b). Foreign currency income and An unsere Investoren expenses are generally translated at the exchange rate at the end of the month.

Gains and losses resulting from the translation of monetary assets and liabilities are recognized in the income statement. Gains and losses on the translation of nonmonetary items are either taken directly to the revaluation reserve or recognized in net trading income, depending on the item’s underlying measurement category. Our Business Divisions The Group reporting of Postbank’s foreign subsidiaries prepared in Unsere Geschäftsfelder foreign currencies are translated using the modified closing rate method (IAS 21.39). The resulting exchange differences are taken directly to equity.

(q) Income taxes Income taxes are recognized and measured in accordance with IAS 12. Deferred taxes are generally recognized for all temporary differences between the carrying amounts in the IFRS financial statements and Our Responsibility Our Responsibility the carrying amounts in the tax accounts (tax base). Deferred tax assets are recognized for tax loss carryforwards in the amount of their probable future utilization.

Deferred tax items are reported under “deferred tax assets” in the case of assets and “deferred tax liabilities” in the case of liabilities.

Current and noncurrent deferred tax assets and liabilities are offset in accordance with IAS 12.74.

Income and expenses from deferred taxes are recognized under Group Management Report income tax separately from current tax income and expenses. Recognition depends on the accounting treatment of the underlying item. For example, deferred taxes are recognized in net profit or loss when the balance sheet item is itself recognized in net profit or loss. Deferred taxes are credited or charged to the revaluation reserve in equity when the balance sheet item is itself credited or charged directly to equity (IAS 12.61), e.g., in the case of remeasure ment of available-for-sale securities.

In accordance with IAS 12.39, deferred tax liabilities for temporary differences associated with investments in subsidiaries, branches, Consolidated Financial Statements and associates do not have to be recognized if the parent is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Because both criteria are met in the case at hand, no deferred tax liabilities were recognized for temporary differences in connection with investments in subsidiaries amounting to €31 million. Other Information

111 Fiscal Year I Consolidated Financial Statements I Notes

(5) New developments in international accounting under IFRSs The amended IAS 32 contains new guidance on distinguishing between equity and debt. Adoption of this Standard has no material effects for New developments in fiscal year 2009 Postbank. The clarifications, amendments, and additions made as part The following Standards were applied for the first time in the report- of the Annual Improvements Project 2008 did not have any material ing period: effects for Postbank.

IFRS 8 Operating Segments, IAS 1 Presentation of Financial Statements Amendments resulting from Standards and Interpretations to (revised 2007), IAS 23 Borrowing Costs, IAS 32 Amendment 2008: be applied in future fiscal years Financial instruments: presentation, IFRS 7 Amendment 2009: The principal Standards issued, the date of obligatory first-time Improving Disclosures about Financial Instruments, and the Annual adoption, and the expected effects on Postbank are summarized below: Improvements Project 2008. Effects on Postbank’s consolidated financial statements resulted from IFRS 8 and IAS 1 (revised 2007). IFRS 8 has superseded the provisions of IAS 14 on segment reporting. The new guidance implements segment reporting using the ‘management approach‘. The adoption of IFRS 8 does not have any material

Standard Date of first-time adoption Description of amendments and their effects for Postbank IFRS 3: Business Combinations January 1, 2010 (endorsed by EU Among other things, the new IFRS 3 contains amendments in connection with the Regulation 495/2009 dated measurement of the cost of acquisition and the calculation of goodwill (option to June 3, 2009) use the full goodwill method), which in the case of acquisitions of companies will tend to lead to more frequent fair value measurements and greater volatility in equity and/or earnings. IAS 27: Consolidated and Separate January 1, 2010 (endorsed by EU The new IAS 27 eliminates the option of choosing between the ‘economic entity Financial Statements Regulation 494/2009 dated model‘ and the ‘modified parent company model‘ when interests are acquired after June 3, 2009) obtaining control in favor of the ‘economic entity model‘. Differences between the purchase price and the proportionate carrying amount are recorded in equity. Sales of interests without loss of control are accounted for as equity transactions, while those that do result in loss of control – including for the interests retained – are recognized in profit or loss. In the future, this guidance will also tend to produce higher volatility in equity and/or earnings in connection with the sale or acquisition of interests by Postbank. IAS 39: Financial Instruments: January 1, 2010 (endorsed by EU An amendment to IAS 39 regarding eligible hedged items was issued. The amend- Recognition and Measurement Regulation 839/2009 dated ments are required to be applied retrospectively for all fiscal years beginning September 15, 2009) on or after July 1, 2009.

effects for Postbank. The core element of the amendments to IAS 1 The IASB made clarifications, amendments, and additions to ten is the extension of the existing income statement to include gains Standards and two Interpretations as part of the Annual Improve and losses recognized directly in equity to produce a statement of ments Project 2009. The amended Standards are required to be comprehensive income. Information on components of the statement applied for all fiscal years beginning on or after January 1, 2010. of changes in equity was shortened accordingly. The revised Postbank does not anticipate any material effects from the new Standard IAS 23 eliminates the option to include borrowing costs requirements. relating to qualifying assets.

The borrowing costs must be capitalized as part of the cost of (6) Restatement of prior-year and prior-quarter figures that asset. As part of a random sampling examination that was conducted by the Deutsche Prüfstelle für Rechnungslegung e.V. (the Financial Reporting The amendment to IFRS 7 resulted in the introduction of a three-level Enforcement Panel, FREP), the view was taken that the allowance for fair value hierarchy for disclosures in the Notes. In addition to allo- losses on loans and advances in the amount of €90 million posted cating the financial instruments recognized at fair value in the balance during the first nine months of 2009 should have been recognized in sheet to the relevant levels, a reconciliation is required for Level 3 the 2008 consolidated financial statements. In order to avoid delaying 136 instruments held. The relevant information is supplied in Note 42, the preparation of the 2009 consolidated financial statements, the Fair values of financial instruments. Bank has concurred with this appraisal, especially since the result remains unchanged when viewed across both reporting periods. The issue involves a mere period shift.

112 Fiscal Year I Consolidated Financial Statements I Notes

The retrospective adjustment led to an increase in the cost of additions Interest income and expenses on swaps used in hedging relationships to the allowance for losses on loans and advances of €90 million in are reported as a net expense. The underlying transactions are hedging fiscal year 2008. The allowance for losses on loans and advances instruments that meet the qualification criteria for hedge accounting increased accordingly by €90 million. The adjustment also led to an in accordance with IAS 39 amounting to €497 million (previous year: increase in income from deferred taxes in the amount of €25 million €2 million). In addition, this item includes €242 million (previous year: and to an adjustment of the foreign currency translation reserve by €3 million) in derivatives that hedge loans and advances designated €– 2m, thus increasing the consolidated net loss for 2008 by €65 million. under the fair value option. In the course of the retrospective changes, earnings per share, seg- For our Shareholders ment reporting, the cash flow statement, the statement of changes in Gains and losses from the remeasurement of fair value hedges are An unsere Investoren equity, and the prior-quarter figures have been adjusted accordingly. reported under net gains/losses on hedges, which are composed of the following items:

Income statement disclosures 2009 2008 €m €m (7) Net interest income

Gains on the fair value remeasurement 2009 2008 of hedged items 197 2,797

€m €m Our Business Divisions

Losses on the fair value remeasurement Unsere Geschäftsfelder of hedging instruments – 202 – 2,769 Interest and current income Interest income from: Total – 5 28 Lending and money market transactions 5,445 6,245 Fixed-income and book-entry securities 2,493 3,377 Trading operations 40 202 (8) Allowance for losses on loans and advances Net gains/losses on hedges – 5 28

1 7,973 9,852 2009 2008 Our Responsibility €m €m

Current income from: Equities and other non-fixed-income Cost of additions to allowance for securities 5 75 losses on loans and advances Investments in associates 9 11 Specific valuation allowances 746 521 Portfolio-based valuation allowances 31 32 14 86 Cost of additions to provisions Debt securities in issue 7,987 9,938 for credit risks 14 23 Direct loan write-offs 63 39

Interest expense on: Group Management Report Deposits 3,975 6,292 Income from reversals of the allowance Debt securities in issue 563 641 for losses on loans and advances Subordinated debt 261 307 Specific valuation allowances 146 92 Swaps 739 5 Trading operations 44 198 Income from the reversal of provisions for credit risks 14 4 5,582 7,443 Recoveries on loans previously written off 16 21

Total 2,405 2,495 Total 678 498 Consolidated Financial Statements Interest income from lending and money market transactions includes €663 million (previous year: €427 million) of the allowance for losses €48 million (previous year: €33 million) of interest income accrued on on loans and advances relates to customer receivables classified as impaired assets (unwinding in accordance with IAS 39). loans and receivables, and €0 million (previous year: €19 million) to guarantees, warranties and irrevocable loan commitments. Interest expense on liabilities, debt securities in issue, and subordi nated debt relates to financial instruments classified as liabilities at amortized cost. Other Information

Interest expense on trading operations includes refinancing expenses 112 from trading activities. 1Prior-period figures restated (see Note 6)

113 Fiscal Year I Consolidated Financial Statements I Notes

The cost of additions to and the income from reversals of the allow (10) Net trading income ance for losses on loans and advances to customers can be broken Quoted prices are generally used to establish the fair values of trading down by product group as follows: assets and trading liabilities. The fair values of unlisted products are established using the discounted present value method or suitable

2009 20081 valuation models. In addition to trading income and expenses, net €m €m trading income also includes net remeasurement gains/losses on trading assets. Additions Private mortgage lending 215 190 2009 2008 Home savings loans 4 5 €m €m Commercial loans 276 156 Public sector – – Installment credits 67 45 Net income from sale of securities and loans 45 37 Other loans and advances 164 73 Net gains/losses on remeasurement of Portfolio-based valuation allowances 31 32 securities and loans Bonds and other fixed-income Total 757 501 securities 41 – 48 Equities 3 – €21 million (previous year: €52 million) of the cost of additions to Loans (held for trading) 2 13 the allowance for losses on loans and advances relates to loans and advances to other banks. 46 – 35

2009 2008 Net gains/losses on derivatives carried in €m €m the trading portfolio and the banking book Reversal Gain on derivatives 4,929 18,787 Private mortgage lending 66 54 Loss on derivatives – 5,542 – 19,150 Home savings loans 1 2 Commercial loans 49 19 – 613 – 363 Public sector – – Installment credits 2 2 Net gains/losses from application of the fair value option Other loans and advances 22 15 of which loans and advances to Portfolio-based valuation allowances – – customers 64 433 Total 140 92 of which derivatives substantively linked to the fair value option – 84 – 422 €6 million (previous year: €0 million) of the income from the reversal – 20 11 of the allowance for losses on loans and advances relates to loans and advances to other banks. Foreign exchange gain/loss 51 – 33 Net fee and commission income carried in the trading portfolio – 7 – 6 (9) Net fee and commission income Total – 498 – 389 2009 2008 €m €m The net loss on derivatives carried in the trading portfolio and the banking book includes expenses from interest on swaps of €186 Giro business 370 364 million (previous year: income of €15 million). The underlying swap Securities business 133 165 holdings are not part of a hedging relationship as defined by IAS 39. Lending and guarantee business 128 116 Branch business 445 473 The net loss on derivatives in the trading portfolio and the banking Other fee and commission income 253 313 book includes income from asset/liability management amounting Total 1,329 1,431 to €100 million (previous year: €554 million) (see Note 4 (g)).

“Other fee and commission income” includes income from payment The net loss on derivatives also includes losses on the measurement transaction services for third parties. of embedded derivatives from structured credit products of €652 million (previous year: losses of €755 million), gains on capital-guaranteed Net fee and commission income from trust activities amounted to promissory note loans (CPPI) of €33 million (previous year: losses of €8 million (previous year: €8 million) and is reported in “Other fee €133 million), and gains on other promissory note loans of €0 million and commission income”. (previous year: losses of €31 million). 112 1Prior-period figures restated (see Note 6)

114 Fiscal Year I Consolidated Financial Statements I Notes

€97 million (previous year: €156 million) of net impairment loss 2009 2008 €m €m on investment securities relates to writedowns of structured credit products, €136 million (previous year: €371 million) to writedowns of Net income from interest rate products 84 – 5 other debt instruments, and €34 million (previous year: €97 million) Net loss on derivatives carried in the to retail funds and investments. trading portfolio and the banking book – 613 – 363 Net gain/loss from application of the fair value option – 20 11 (12) Administrative expenses For our Shareholders

Net income from equities 7 7 An unsere Investoren Foreign exchange gain/loss 51 – 33 Consolidated administrative expenses are composed of staff costs, Net fee and commission income carried non-staff operating expenses, and amortization, depreciation, and in the trading portfolio – 7 – 6 writedowns of intangible assets and property and equipment. These expenses are composed of the following items: Total – 498 – 389 2009 2008 €m €m

(11) Net income from investment securities Staff costs

Net income from investment securities contains net gains/losses from Wages and salaries 1,070 1,092 Our Business Divisions Unsere Geschäftsfelder the sale and remeasurement of investment securities, investments in Social security contributions 108 106 unconsolidated subsidiaries, and investments in associates. Expenses for pensions and other benefits 228 212 2009 2008 €m €m 1,406 1,410

Net income from loans-and-receivables Other administrative expenses 1,295 1,373 investment securities – 126 – 486 Amortization of intangible assets 74 95 thereof net income from sale 93 2 Depreciation and writedowns of Gains on sale 159 59 property and equipment 89 91 Our Responsibility Losses on sale 66 57 thereof net impairment loss – 219 – 488 Total 2,864 2,969

Net income from available-for-sale Expenses for pensions and other benefits primarily include expenses investment securities – 44 – 786 for defined contribution plans amounting to €119 million (previous thereof net income from sale 4 – 650 year: €117 million) and pension expenses for defined benefit plans Gains on sale 66 205 amounting to €81 million (previous year: €78 million). Losses on sale 62 855 thereof net impairment loss – 48 – 136 Other administrative expenses relate primarily to IT costs of €277 Net income from loans to other banks – 2 – million (previous year: €288 million); operating building and premises thereof net income from sale expenses of €154 million (previous year: €154 million); expenses for Group Management Report of loans and receivables – 2 – intragroup services received from Deutsche Post AG in the amount of €139 million (previous year: €136 million); market communication Net income from loans to customers 19 30 costs of €115 million (previous year: €149 million); and legal, consulting, thereof net income from sale and audit costs of €52 million (previous year: €92 million). €1 million of loans and receivables 19 30 of the other administrative expenses relates to investment property Net income from investments in associates 5 – 7 (previous year: €1 million).

Total – 148 – 1,249 Other administrative expenses include lease expenses of €138 million (previous year: €150 million), which are composed of expenses for 2009 2008 leased intangible assets, land and buildings, and operating and office Consolidated Financial Statements €m €m equipment under operating leases.

Net income from bonds and promissory The amortization and writedowns of intangible assets do not include note loans 104 – 6 any impairment losses (previous year: €23 million). Net income from equities and other non-fixed-income securities 10 – 612 Net income from investments Impairment losses of €25 million were charged on property and in associates 5 – 7 equipment in the year under review (previous year: €21 million).

Impairment – 267 – 624 Other Information

Total – 148 – 1,249

115 Fiscal Year I Consolidated Financial Statements I Notes

(13) Other income (15) Income taxes Income taxes in the Group were composed of the following items: 2009 2008 €m €m 2009 20081 €m €m Income from property and equipment 36 27 Income from reversal of accruals 33 32 Effective income tax expense Income from reversal of other provisions 26 22 Current income tax expense Reimbursements from internal welfare 20 19 Corporate income tax and Participation in loss by silent partner- solidarity surcharge 54 26 ships and profit participation certificates Trade income tax 28 22 outstanding 13 37 Income from uncollectable transactions 4 6 82 48 Miscellaneous 55 75 Income from prior-period income tax 9 86 Total 187 218

Income from property and equipment mainly comprises rental income 91 134 of €29 million (previous year: €22 million), of which €4 million relates to investment property. Expense from deferred taxes from temporary differences – 643 – 164 The miscellaneous item includes a large number of individual items. from the reversal of loss carryforwards 77 – 149

– 566 – 313 (14) Other expenses Total – 475 – 179

2009 2008 The following reconciliation illustrates the relation between profit €m €m after tax and income tax expense:

Additions to provisions 19 17 Expenses for claims settlement and 2009 20081 ex gratia payments 9 6 €m €m Expenses for other taxes 5 11 Expenses for the Federal Posts and Profit/loss from ordinary activities Telecommunications Agency (BAnstPT after tax 77 – 885 and StiftPT) 5 6 Income tax expense – 475 – 179 Expenses from property and equipment 3 6 Loss before tax – 398 – 1,064 Miscellaneous 90 57

Applicable tax rate 29.83 % 29.83 % Total 131 103 Expected income taxes – 119 – 317

Expenses from property and equipment include losses on the disposal Tax effects of property and equipment and intangible assets. Effect of changes in tax rate – 6 – 3 Effect of difference between applicable Expenses for other taxes relate primarily to land taxes amounting tax rates in Germany and abroad – 27 – 34 to €4 million (previous year: €3 million) and foreign wealth taxes Effect of tax-free income and non- amounting to €1 million (previous year: €2 million). deductible expenses – 1 – 3 Effect of unrecognized deferred taxes 20 – The miscellaneous item includes interest expense on payables to tax Effect of prior-period taxes – 184 71 authorities in the amount of €4 million (previous year: €7 million) Effect of equities and investments and €3 million of depreciation on collateral received in lending. resulting from section 8b KStG – 161 115 In addition, the miscellaneous item includes a large number of individual items. Other 3 – 8

– 356 138

Income tax expense – 475 – 179

112 1Prior-period figures restated (see Note 6)

116 Fiscal Year I Consolidated Financial Statements I Notes

If a corporation receives dividends or other income from an investment Loans and advances to other banks can be broken down as follows or if it generates a capital gain on the disposal of this investment, in accordance with the categories of financial instruments defined 95 % of this investment income remains tax-free for the receiving in IAS 39: corporation in accordance with section 8b of the Körperschafts steuergesetz (KStG – German Corporation Tax Act). Losses on sales Dec. 31, 2009 Dec. 31, 2008 in connection with investments are not tax-deductible. These rules are €m €m based on the principle that dividends and capital gains on the disposal of shares in corporations remain tax-free and losses on sales are not Loans and advances to other banks For our Shareholders

(loans and receivables) 9,262 10,547 An unsere Investoren tax-deductible provided that they remain within the corporations. thereof fair value hedges 547 863 Such gains/losses therefore become tax-effective if they are transferred Money market assets (loans and receivables) 5,205 8,069 to ineligible recipients (natural persons or associations of persons) under the Teileinkünfteverfahren (German partial income system). Loans and advances to other banks (available for sale) – 68 No distinction is made between domestic and foreign investments.

Total 14,467 18,684

Balance sheet disclosures The loans and advances to other banks can be broken down by

product group as follows: Our Business Divisions Unsere Geschäftsfelder (16) Cash reserve

Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 €m €m €m €m

Securities repurchase agreements 5,054 8,271 Cash 890 923 Overnight money 4,176 3,010 Balances with central banks 3,644 2,494 Loans 4,564 5,548 Registered bonds 417 765

Total 4,534 3,417 Term deposits 152 280 Our Responsibility Other loans and advances 104 810 €3,628 million (previous year: €2,315 million) of the balances with central banks relates to balances with the Deutsche Bundesbank. Total 14,467 18,684

The minimum reserve requirement at the end of December 2009 Collateral received that can be unconditionally liquidated or can be was €2,209 million (previous year: €1,935 million). unconditionally sold:

Fair value of collateral that Fair value of collateral that (17) Loans and advances to other banks can be unconditionally was sold or repledged liquidated or can be and is subject to an

unconditionally sold obligation to return Group Management Report Dec. 31, 2009 Dec. 31, 2008 €m €m Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 €m €m €m €m

Domestic banks Financial collateral 6,137 10,136 1,507 2,855 Payable on demand 593 935 Other loans and advances 3,764 6,415 Non-financial collateral – – – –

4,357 7,350 Total 6,137 10,136 1,507 2,855 Foreign banks Payable on demand 3,546 2,241 Collateral is utilized at standard market conditions.

Other loans and advances 6,564 9,093 Consolidated Financial Statements As of December 31, 2009, receivables under genuine repurchase 10,110 11,334 agreements amounted to €5,054 million (previous year: €8,271 million). Postbank is the lender in such transactions. Securities purchased Total 14,467 18,684 under agreements to resell relate to listed bonds of public sector issuers, issuances by German and foreign banks, corporate bonds, €4,081 million (previous year: €5,220 million) of loans and advances and equities. to other banks is due after more than 12 months. Loans and advances to other banks include fixed-interest loans in the Other Information amount of €9.2 billion (previous year: €12.4 billion) and variable-interest loans in the amount of €5.2 billion (previous year: €6.3 billion).

117 Fiscal Year I Consolidated Financial Statements I Notes

(18) Loans and advances to customers The total amount of outstanding minimum lease payments is €269 million (previous year: €276 million) and has the following maturity Dec. 31, 2009 Dec. 31, 2008 structure: €m €m Dec. 31, 2009 Dec. 31, 2008 Private mortgage lending 70,217 69,370 €m €m Home savings loans 3,766 3,581 Commercial loans 30,383 24,277 in the first year after the balance sheet date 69 61 Public sector 1,589 2,182 in the second year after the balance sheet date 49 56 Installment credits 3,620 2,973 in the third year after the balance sheet date 40 42 Other loans and advances 1,468 2,935 in the fourth year after the balance sheet date 28 31 in the fifth year after the balance sheet date 17 19 Total 111,043 105,318 more than five years after the balance sheet date 66 67 thereof: Secured by mortgage charges 56,561 54,319 Total 269 276 Public-sector loans 2,871 2,182

The reconciliation to the present value of the outstanding minimum Dec. 31, 2009 Dec. 31, 2008 €m €m lease payments is as follows:

Domestic customers 88,760 83.404 Dec. 31, 2009 Dec. 31, 2008 €m €m Foreign customers 22,283 21.914

Outstanding minimum lease payments 269 276 Total 111,043 105,318 Unguaranteed residual values 3 4

Loans and advances to customers without a fixed maturity amounted Total gross investment 272 280 to 1 % of total assets (previous year: 0.9 %). These loans and advances Unearned finance income 44 49 have been allocated to the shortest maturity band in the maturity structure. Net investment 228 231 Present value of unguaranteed €84,064 million (previous year: €78,577 million) of loans and advances residual values 2 2 to customers is due after more than 12 months.

Present value of minimum lease payments 226 229 Loans and advances to customers include fixed-interest loans in the amount of €94.9 billion (previous year: €91.3 billion) and variable-in- The specific valuation allowances for uncollectible outstanding minimum terest loans in the amount of €16.1 billion (previous year: €14.0 billion). lease payments amount to €0.2 million (previous year: €0.2 million).

Loans and advances to customers can be broken down as follows in accordance with the categories of financial instruments defined (19) Total credit extended in IAS 39: Dec. 31, 2009 Dec. 31, 2008 €m €m Dec. 31, 2009 Dec. 31, 2008 €m €m Loans and advances to other banks 14,467 18,684 Loans and receivables 102,408 96,713 Loans and advances to customers 111,043 105,318 thereof fair value hedges 2,079 1,754 Guarantees 1,105 1,296 Fair value option 8,635 8,605 Total 126,615 125,298 Total 111,043 105,318

Loans and advances to customers include amounts due under finance (20) Allowance for losses on loans and advances leases of €357 million (previous year: €325 million). The gross The allowance for losses on loans and advances covers all identifiable investment value of the leases amounts to €272 million (previous year: credit risks. Portfolio-based valuation allowances were recognized €280 million). for the latent credit risk.

Risks have been provided for by an allowance for losses on loans and advances carried under assets, and by the recognition of provisions for credit risks.

118 Fiscal Year I Consolidated Financial Statements I Notes

The allowance for losses on loans and advances is composed of the The total amount of loans at the balance sheet date for which no following items: interest payments are received was €1,566 million (previous year: €951 million). Writedowns were charged on loans with a total volume Dec. 31, 2009 Dec. 31, 20081 of €3,811 million (previous year: €1,921 million). The outstanding €m €m interest receivables accounted for by these loans amounted to

Allowances for losses on loans and €96 million at December 31, 2009 (previous year: €98 million). advances to other banks 64 52 €63 million of loans and advances was written off directly in the year Allowances for losses on loans and For our Shareholders advances to customers 1,577 1,271 under review (previous year: €39 million). Recoveries on loans written An unsere Investoren Total allowances for losses on loans off amounted to €16 million (previous year: €21 million). and advances 1,641 1,323 Provisions for credit risks 42 48 (21) Trading assets Total 1,683 1,371 Group trading activities consist of trading in bonds and other fixed- income securities, equities and other non-fixed-income securities, The allowance for losses on loans and advances carried under assets promissory note loans and foreign currencies, as well as derivatives. changed as follows in the year under review: All trading assets are carried at their fair values. Our Business Divisions Unsere Geschäftsfelder Specific Portfolio- Total Dec. 31, 2009 Dec. 31, 2008 valuation based valuation €m €m allowances allowances

2009 20081 2009 2008 2009 20081 Bonds and other fixed-income securities €m €m €m €m €m €m Public-sector issuers 147 28 Other issuers 525 458 Balance at Jan. 1 1,209 1,071 114 83 1,323 1,154 Reclassification – 5 – 5 – 0 – 672 486 Additions Allowance charged Equities and other non-fixed-income Our Responsibility to the income securities 300 18 statement 746 521 31 32 777 553 Building loans held for trading 212 216 Positive fair values of derivatives Disposals carried as trading assets 18,640 15,209 Utilization 261 260 – 1 261 261 Positive fair values of banking Allowance reversed book derivatives 450 459 to the income Positive fair values from derivatives statement 146 92 – – 146 92 relating to hedged items accounted Unwinding 48 33 – – 48 33 for under the fair value option 197 185 Currency translation differences 4 – 2 – – 4 – 2 Total 20,471 16,573 Group Management Report Balance at Dec. 31 1,491 1,209 150 114 1,641 1,323 Holdings of €15,114 million (previous year: €13,211 million) are due Collective specific valuation allowances are also reported under the after more than 12 months. specific valuation allowances. €0.4 billion of the bonds and other fixed-income securities has a fixed The allowance for losses on loans and advances to customers can be rate of interest over the entire term (previous year: €0.3 billion), while €0.3 broken down by product group as follows: billion (previous year: €0.2 billion) has a variable rate of interest (floaters).

The following amounts of bonds and other fixed-income securities, Dec. 31, 2009 Dec. 31, 20081 €m €m and equities and other non-fixed income securities carried as trading assets, are negotiable and listed: Consolidated Financial Statements Specific valuation allowances Private mortgage lending 429 394 Dec. 31, 2009 Dec. 31, 2008 Home savings loans 10 12 €m €m Commercial loans 412 313 Public sector – – Bonds and other fixed-income securities 628 456 Installment credits 167 118 Equities and other non-fixed-income Other loans and advances 409 320

securities 286 12 Other Information Portfolio-based valuation allowances 150 114

Total 1,577 1,271 112 1Prior-period figures restated (see Note 6)

119 Fiscal Year I Consolidated Financial Statements I Notes

(22) Hedging derivatives (23) Investment securities Hedges with positive fair values that qualify for hedge accounting in Investment securities include bonds and other fixed-income securities, accordance with IAS 39 are composed of the following items: equities and other non-fixed income securities, investments in associates, and investments in unconsolidated subsidiaries. Dec. 31, 2009 Dec. 31, 2008 €m €m Dec. 31, 2009 Dec. 31, 2008 €m €m Assets Bonds and other fixed-income securities Hedging derivatives on loans to Public-sector issuers 24,887 26,617 other banks Other issuers 46,937 55,855 Loans and receivables – 1

71,824 82,472 – 1 Equities and other Hedging derivatives on loans to non-fixed-income securities customers Equities 4 – Loans and receivables 2 2 Investment fund shares 460 475

2 2 464 475

Hedging derivatives on investment securities Investments in associates 19 19 Bonds and other fixed-income Investments in unconsolidated securities 71 59 subsidiaries 52 92

71 59 Total 72,359 83,058

Liabilities Bonds and other fixed-income securities contain securities and Deposits from other banks 32 27 interest coupons due on the balance sheet date and amounting to €128 million (previous year: €2 million). Due to customers 67 14 Debt securities in issue 203 158 Holdings of €64,985 million (previous year: €70,654 million) are due Subordinated debt 145 213 after more than 12 months.

447 412 €52,5 billion of the bonds and other fixed-income securities has a fixed rate of interest over the entire term (previous year: €56.7 Total 520 474 billion), while €19.3 billion (previous year: €25.8 billion) has a variable rate of interest (floaters). Holdings of €336 million (previous year: €301 million) are due after more than 12 months. Postbank‘s portfolio of structured credit products has a total volume of €5.8 billion (previous year: €6.3 billion).

120 Fiscal Year I Consolidated Financial Statements I Notes

Investment securities are classified as follows in accordance with the Changes in the fair value of unhedged available-for-sale securities categories of financial instruments as defined in IAS 39: in the amount of €4 million were charged to the revaluation reserve (previous year: €– 1,007 million). €78 million (previous year: €788 Dec. 31, 2009 Dec. 31, 2008 million) carried in the revaluation reserve was reversed to income in €m €m the period under review from the disposal of investment securities and the recognition of impairment losses. Bonds and other fixed-income securities Impairment losses totaling €267 million (previous year: €624 million) Loans and receivables investment For our Shareholders securities 59,401 68,859 were recognized in fiscal year 2009 to reflect the economic perfor- An unsere Investoren thereof fair value hedges 23,595 31,318 mance of the financial instruments. Held to maturity 73 186 Available for sale 12,350 13,427 In the third quarter of 2008, Postbank reclassified bonds with a principal thereof fair value hedges 3,866 7,290 amount of €1.6 billion and a fair value of €1.5 billion as of July 1, 2008 from the available-for-sale category to the loans and receivables 71,824 82,472 category due to a change in its intention to hold the bonds. It also reclassified securities (primarily bonds issued by foreign states, banks, Equities and other non-fixed-income and corporates) with a principal amount of €33.2 billion and a fair securities value of €32.9 billion from the available-for-sale category to the loans Our Business Divisions Available for sale 464 475 and receivables category as of October 1, 2008. Unsere Geschäftsfelder

464 475 In the first quarter of 2009, Postbank altered its intention to hold a portion of the corporate bonds in its portfolio as available for sale, Investments in associates (available for sale) 19 19 and now intends to hold them for the foreseeable future. It therefore Investments in unconsolidated subsidiaries reclassified corporate bonds with a principal amount of €385 million (available for sale) 52 92 from the available-for-sale category to the loans and receivables category as of January 28, 2009 at a fair value of €320 million. Total 72,359 83,058 Our Responsibility Our Responsibility As of December 31, 2009, the total amount of securities reclassified The following amounts of investment securities are negotiable and in accordance with IAS 39.50E had a fair value of €29.8 billion and a listed: carrying amount of €30.8 billion. Of this, the securities reclassified in 2008 had a fair value of €29.6 billion (previous year: €35.8 billion) Dec. 31, 2009 Dec. 31, 2008 and a carrying amount of €30.6 billion (previous year: €35.8 billion). €m €m

Prior to the three above-mentioned reclassification dates, the changes Bonds and other fixed-income securities 70,174 80,118 in fair value recognized in the revaluation reserve for the securities Equities and other non-fixed-income that were reclassified amounted to €– 468 million before tax. €– 64 million securities 325 248 of this amount relates to reclassifications in 2009 (previous year: Investments in associates 5 7 €–73 million). Had Postbank not changed its intention to hold the Group Management Report bonds, the loss recognized in the revaluation reserve would have Investment securities were furnished as collateral for the following increased by a further €973 million in the period up to December 31, liabilities: 2009 (previous year: €97 million).

Dec. 31, 2009 Dec. 31, 2008 Given a nominal weighting of the reclassified securities, the effective €m €m interest rate calculated on the basis of their restated cost as of the date of the reclassifications was 4.4 % (range of effective interest rates: Liabilities 24,063 40,800 1.8 % to 34.5 %). The estimated cash flows that Postbank expects as Contingent liabilities 23 – of the date of the reclassifications amount to €45.4 billion. In fiscal year 2009, €31 million in impairment losses was charged for all reclassified

Total 24,086 40,800 securities, as were disposal gains of €20 million on reclassified securities. Consolidated Financial Statements

Investment securities are pledged as collateral in accordance with Interest amounting to €1,160 million (previous year: €392 million) standard market conditions. accrued for the reclassifications.

To enable it to enter into open market transactions, Postbank has pledged securities with an eligible value of €15 billion (previous year: €30 billion) as collateral to the European Central Bank. Open market transactions amounted to €8 billion at the balance sheet date Other Information (previous year: €23 billion). The securities lodged as collateral continue to be reported as investment securities.

121 Fiscal Year I Consolidated Financial Statements I Notes

(24) Intangible assets The acquired software, concessions, industrial rights item includes the “BHW” brand in the amount of €319 million. The „BHW“ brand is Dec. 31, 2009 Dec. 31, 2008 allocated to the Retail Banking segment. The capitalized amounts for €m €m customer relationships amounted to €81 million (previous year: €86 million), while those for beneficial contracts amounted to €53 million Acquired goodwill 1,651 1,631 (previous year: €59 million). Acquired software, concessions, industrial rights 622 649 A comparison of historical cost and cumulative amortization with Internally generated intangible assets the prior-period amounts is presented below: and software 68 80 Advance payments on intangible assets and in-process intangible assets 27 11

Total 2,368 2,371

Goodwill increased by €20 million in Q1 2009 due to the initial consol idation of Betriebs-Center für Banken Processing GmbH.

€1,577 million of acquired goodwill (previous year: €1,577 million) is attributable to the Retail Banking segment, while €33 million (previous year: €33 million) and €41 million (previous year: €21 million) are attributable to the Financial Markets and Transaction Banking segments respectively.

Acquired goodwill Acquired software, Internally generated Advance payments Total concessions, intangible assets on intangible assets industrial rights and software and in-process intangible assets €m €m €m €m €m

Historical cost

Opening balance at Jan. 1, 2008 1,642 935 82 122 2,781

Changes in basis of consolidation – – – – – Additions – 41 5 10 56 Reclassifications – 60 36 – 96 0 Disposals – 28 – 2 30

Closing balance at Dec. 31, 2008 1,642 1,008 123 34 2,807

Changes in basis of consolidation – – – – – Additions 20 24 5 25 74 Reclassifications – 5 2 – 7 0 Disposals – 16 3 2 21

Closing balance at Dec. 31, 2009 1,662 1,021 127 50 2,860

122 Fiscal Year I Consolidated Financial Statements I Notes

Amortization For our Shareholders

Opening balance at Jan. 1, 2008 11 328 27 0 366 An unsere Investoren

Changes in basis of consolidation – – – – – Amortization – 57 16 23 96 Additions – – – – – Reclassifications – – – – – Disposals – 26 – – 26

Closing balance at Dec. 31, 2008 11 359 43 23 436

Changes in basis of consolidation – – – – – Our Business Divisions Unsere Geschäftsfelder Amortization – 55 19 – 74 Additions – – – – – Reclassifications – 1 – 1 – 0 Disposals – 16 2 – 18

Closing balance at Dec. 31, 2009 11 399 59 23 492

Carrying amount at Dec. 31, 2008 1,631 649 80 11 2,371

Our Responsibility Our Responsibility Carrying amount at Dec. 31, 2009 1,651 622 68 27 2,368

The carrying amounts of intangible assets changed as follows in the year under review:

Carrying Additions Disposals Reclassifications Amortization Carrying amount amount at Jan. 1, 2009 at Dec. 31, 2009 €m €m €m €m €m €m

Acquired goodwill 1,631 20 – – – 1,651 Group Management Report Acquired software, concessions, industrial rights 649 24 – 4 55 622 Internally generated intangible assets and software 80 5 1 3 19 68 Advance payments on intangible assets and in-process intangible assets 11 25 2 – 7 0 27

Total 2,371 74 3 0 74 2,368

In fiscal year 2009, borrowing costs for qualifying assets (software Consolidated Financial Statements under development) of €0.1 million were capitalized in accordance with IAS 23. The underlying capitalization rate was 2.7 %.

The carrying amount as of December 31, 2009 of advance payments on intangible assets was €5 million (previous year: €6 million); the carrying amount of in-process intangible assets was €22 million (previous year: €5 million). Other Information

123 Fiscal Year I Consolidated Financial Statements I Notes

(25) Property and equipment Land and Operating Advance Total buildings and office payments Dec. 31, 2009 Dec. 31, 2008 equipment and assets €m €m under development €m €m €m €m Land and buildings 686 721 Operating and office equipment 142 141 Depreciation Advance payments and assets under development 10 17 Opening balance at Jan. 1, 2008 311 352 – 663 Total 838 879

Changes in basis A comparison of historical cost and cumulative depreciation with the of consolidation – – – – prior-period amounts is presented below: Depreciation 41 50 – 91 Additions – 1 – 1 – – 2 Land and Operating Advance Total Reclassifications – – – – buildings and office payments equipment and assets Disposals 1 65 – 66 under development Closing balance €m €m €m €m at Dec. 31, 2008 350 336 – 686

Historical cost Changes in basis of consolidation – – – – Opening balance Depreciation 43 46 – 89 at Jan. 1, 2008 1,079 500 11 1,590 Additions – 7 – – – 7 Reclassifications – – – – Changes in basis Disposals – 75 – 75 of consolidation – – – – Additions – 41 13 54 Closing balance Reclassifications 1 6 – 7 0 at Dec. 31, 2009 386 307 – 693 Disposals 9 70 0 79

Carrying amount Closing balance at Dec. 31, 2008 721 141 17 879 at Dec. 31, 2008 1,071 477 17 1,565

Carrying amount Changes in basis at Dec. 31, 2009 686 142 10 838 of consolidation – 1 – 1 Additions 1 39 4 44 Reclassifications – 9 – 9 0 Disposals – 77 2 79

Closing balance at Dec. 31, 2009 1,072 449 10 1,531

124 Fiscal Year I Consolidated Financial Statements I Notes

The carrying amounts of property and equipment changed as follows in the year under review:

Carrying Additions Disposals Reclassifications Reversals Depreciation Carrying amount at Jan. 1, 2009 at Dec. 31, 2009 €m €m €m €m €m €m €m Land and buildings 721 1 0 0 7 43 686 Operating and

office equipment 141 40 2 9 – 46 142 For our Shareholders An unsere Investoren Advance payments and assets under development 17 4 2 – 9 – – 10 Total 879 45 4 0 7 89 838

At the balance sheet date, assets under development amounted to €7 million (previous year: €13 million).

The property and equipment for which Postbank acts as the lessor under an operating lease consists of land and buildings. Our Business Divisions Unsere Geschäftsfelder

Dec. 31, 2009 Dec. 31, 2008 €m €m Cost 709 711 Cumulative depreciation 308 288

Carrying amount 401 423

(26) Investment property Our Responsibility Our Responsibility A comparison of historical cost and cumulative depreciation with the prior-period amounts is presented below:

Historical cost Cumulative depreciation Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 €m €m €m €m Investment property 102 102 29 29

The carrying amounts of investment property changed as follows in the year under review: Group Management Report

Carrying amount Additions Disposals Reclassifications Depreciation Carrying amount at Jan. 1, 2009 at Dec. 31, 2009 €m €m €m €m €m €m Investment property 73 – – – – 73

The disclosures relating to investment property for fiscal year 2009 are as follows:

Third-party use Rental income Direct operating Restraints Disposal proceeds Contractual expenses on disposal received obligations

% €m €m €m €m €m Consolidated Financial Statements Investment property 100 4 1 – – –

The disclosures relating to investment property for fiscal year 2008 are as follows:

Third-party use Rental income Direct operating Restraints on Disposal proceeds Contractual expenses disposal received obligations % €m €m €m €m €m Investment property 100 1 1 – – – Other Information

The fair value of investment property amounts to €73 million according to the expert appraisals.

125 Fiscal Year I Consolidated Financial Statements I Notes

(27) Current and deferred tax assets The reasons given for this value are that future taxable profits in excess of the profits arising from the reversal of existing taxable Dec. 31, 2009 Dec. 31, 20081 temporary differences can be expected. €m €m

Current tax assets 280 162 (28) Other assets

Deferred tax assets Dec. 31, 2009 Dec. 31, 2008 from temporary differences 311 536 €m €m from tax loss carryforwards 241 327 Prepaid expenses 478 452 domestic – – Trade receivables 107 116 foreign 241 327 Receivables from tax authorities 14 12 Advances to members 552 863 of the mobile sales force 13 12 Miscellaneous 133 78 Total 832 1,025 Total 745 670 Deferred tax assets were recognized in connection with temporary differences relating to the following balance sheet items, and in €346 million of prepaid expenses (previous year: €323 million) connection with unused tax losses: relates to prepaid brokerage commissions and €46 million (previous year: €58 million) relates to prepaid rent and lease expenses.

Dec. 31, 2009 Dec. 31, 2008 €m €m Miscellaneous other assets include collateral received on lending total ing €59 million. Collateral received is measured at the lower of cost and net realizable value. Assets Loans and advances 58 220 Other assets amounting to €471 million (previous year: €377 million) Allowance for losses on loans have a maturity of more than 12 months. and advances 79 21 Trading assets – – Hedging derivatives 21 22 (29) Deposits from other banks Investment securities 347 367 Property and equipment 13 9 Dec. 31, 2009 Dec. 31, 2008 Other assets 125 157 €m €m

Liabilities Domestic banks Amounts due to other banks and customers 8 53 Payable on demand 468 2,043 Trading liabilities 4,240 2,330 With an agreed maturity or withdrawal notice 28,434 42,700 Hedging derivatives 368 533 Provisions for pensions and other employee benefits 63 70 28,902 44,743 Other provisions 86 60 Foreign banks Other liabilities 7 – Payable on demand 1,289 1,533 With an agreed maturity or 5,415 3,842 withdrawal notice 9,127 16,514

Tax loss carryforwards 241 327 10,416 18,047 Netted against deferred tax liabilities 5,104 3,306 Total 39,318 62,790 Total 552 863 €546 million of the deposits from other banks is covered by fair value As of December 31, 2009, no deferred tax assets were recognized for hedges (previous year: €368 million). temporary differences/ tax carryforwards amounting to €86 million. Despite losses in the current fiscal year and the previous year, €434 Deposits from other banks only include financial instruments classi- million of deferred tax assets were recognized for fiscal year 2009. fied as liabilities at amortized cost.

112 €11,164 million (previous year: €10,689 million) of deposits from 1Prior-period figures restated (see Note 6) other banks is due after more than 12 months.

126 Fiscal Year I Consolidated Financial Statements I Notes

Deposits from other banks include fixed-interest deposits in the amount Amounts due to customers contain fixed-interest deposits in the of €35.0 billion (previous year: €57.7 billion) and variable-interest amount of €46.5 billion (previous year: €51.4 billion) and variable- deposits in the amount of €4.3 billion (previous year: €5.1 billion). interest deposits in the amount of €85.5 billion (previous year: €66.1 billion). As of December 31, 2009 genuine securities repurchase agreements amounted to €7.1 billion (previous year: €14.8 billion). (31) Debt securities in issue In the period under review, a provision of a loan agreement came Amounts reported as debt securities in issue relate to bonds, including For our Shareholders into effect whereby the lender can demand the complete repay- mortgage Pfandbriefe and public-sector Pfandbriefe, and money An unsere Investoren ment of the loan in the amount of €25 million. The lender had not market instruments (e. g., certificates of deposit, euro notes, commercial demanded early repayment of the loan at the time these financial paper). statements were being prepared. Postbank assumes that the terms of the loan will be renegotiated in the first quarter of 2010. Dec. 31, 2009 Dec. 31, 2008 €m €m

(30) Due to customers Public-sector Pfandbriefe 1,735 – Amounts due to customers are primarily composed of savings deposits, Mortgage Pfandbriefe 4,237 3,675 amounts payable on demand, and term deposits. Other debt instruments 10,750 12,667 Our Business Divisions Unsere Geschäftsfelder

Dec. 31, 2009 Dec. 31, 2008 Total 16,722 16,342 €m €m

€5,450 million of the debt securities in issue is covered by fair value Savings deposits hedges (previous year: €5,625 million). With an agreed withdrawal notice of three months 48,876 34,663 Debt securities in issue only include financial instruments classified as With an agreed withdrawal notice of more than three months 177 361 liabilities at amortized cost. Our Responsibility Our Responsibility

49,053 35,024 €8,067 million (previous year: €6,897 million) of debt securities in issue is due after more than 12 months.

Home savings deposits 16,341 16,196 Debt securities in issue include fixed-interest liabilities in the amount thereof: on terminated contracts 72 67 of €15.6 billion (previous year: €13.7 billion) and variable-interest thereof: on allotted contracts 6 6 liabilities in the amount of €1.1 billion (previous year: €2.7 billion). Other amounts due Payable on demand 33,569 26,891 Repurchased own bonds amounting to €706 million (previous year: With an agreed maturity or withdrawal notice 33,025 39,361 €302 million) were deducted directly from debt securities in issue.

66,594 66,252 Group Management Report (32) Trading liabilities Trading liabilities consist of the negative fair values of derivatives Total 131,988 117,472 carried in the trading portfolio and in the banking book as well as Domestic customers 125,982 110,293 delivery obligations under securities sold short. Foreign customers 6,006 7,179 Dec. 31, 2009 Dec. 31, 2008 Total 131,988 117,472 €m €m

€3,099 million of the amounts due to customers is covered by fair value Negative fair values of trading derivatives 19,229 14,638 hedges (previous year: €476 million). Consolidated Financial Statements Negative fair values of banking book derivatives 2,223 1,577 Amounts due to customers only include financial instruments classified Negative fair values from derivatives as liabilities at amortized cost. relating to hedged items accounted for under the fair value option 982 772 €33,907 million (previous year: €32,729 million) of amounts due to customers is due after more than 12 months. Total 22,434 16,987

€16,553 million (previous year: €11,335 million) of trading liabilities Other Information is due after more than 12 months.

127 Fiscal Year I Consolidated Financial Statements I Notes

(33) Hedging derivatives (34) Provisions for pensions and other employee benefits Hedges with negative fair values that qualify for hedge accounting The provisions for pension obligations are as follows: in accordance with IAS 39 are composed of the following items: Reconciliation of the present Dec. 31, 2009 Dec. 31, 2008 value of obligations, fair value €m €m plan assets and net pension provisions at December 31

Assets 2009 2008 2007 2006 2005 Hedging derivatives on loans to €m €m €m €m €m other banks Present value of obligations Loans and receivables 30 38 of fully or partially funded benefits 728 660 698 773 73 30 38 Present value of obligations of non-funded benefits 815 733 729 824 761 Hedging derivatives on loans to Present value of total customers defined benefit obligation 1,543 1,393 1,427 1,597 834 Loans and receivables 128 117 Fair value of plan assets – 470 – 392 – 392 – 381 – 59 Unrealized gains (+)/ 128 117 losses (–) 31 148 108 – 101 – 190

Hedging derivatives on investment securities Net pension provisions 1,104 1,149 1,143 1,115 585 Bonds and other fixed-income securities 1,775 2,357 Equities and other non-fixed-income securities – – Change in present value of total defined benefit obligation 1,775 2,357 2009 2008 €m €m Liabilities Due to customers 4 – Present value of total defined benefit Debt securities in issue 49 68 obligation at January 1 1,393 1,427 Subordinated debt 65 113 Current service cost, excluding employee contributions 22 25 118 181 Employee contributions 3 3 Interest cost 79 78 Total 2,051 2,693 Pension benefits paid – 77 – 84 Past service cost 5 – 2 €1,685 million (previous year: €2,270 million) of hedging derivatives Plan settlements – – is due after more than 12 months. Transfers 2 – 1 Changes in basis of consolidation – 2 – Actuarial gains (–)/losses (+) 118 – 53 Currency effects – – Present value of total defined benefit obligation at December 31 1,543 1,393

128 Fiscal Year I Consolidated Financial Statements I Notes

Change in Change in net plan assets pension provisions

2009 2008 2009 2008 €m €m €m €m

Fair value of plan assets at January 1 392 392 Balance at January 1 1,149 1,143 Employer contributions 68 7 For our Shareholders

Employee contributions – – Pension expense 81 78 An unsere Investoren Expected return on plan assets 17 16 Pension benefits paid – 60 – 67 Gains (+)/losses (–) on plan assets 10 – 6 Employer contributions – 68 – 7 Pension benefits paid – 17 – 17 Employee contributions 2 3 Transfers – – Changes in basis of consolidation – 2 – Changes in basis of consolidation – – Transfers 2 – 1 Plan settlements – – Currency effects – – Currency effects – – Balance at December 31 1,104 1,149

Fair value of plan assets at December 31 470 392 Our Business Divisions Payments in the amount of €56 million are expected for net pension Unsere Geschäftsfelder Plan assets primarily consist of pension fund contracts (70 %, previous provisions in 2010, which are attributable to directly anticipated year: 81 %), fixed-income securities (25 %, previous year: 12 %), other pension payments by the Company. Employer contributions of assets (3 %, previous year: 6 %), and equities (2 %, previous year: 1 %). €5 million are also expected. None of the assets are used directly by the Postbank Group.

Pension expense

Gains and losses 2009 2008 €m €m Our Responsibility Our Responsibility

Gains and losses on plan assets Current service cost 22 25 Interest cost 79 78 2009 2008 2007 2006 2005 €m €m €m €m €m Expected return on plan assets – 16 – 16 Recognized past service cost 5 – 2 Actual return on plan assets 27 10 10 15 6 Amortization of unrecognized gains (–)/losses (+) – 9 – 7 Expected return on plan assets 17 16 17 16 3 Effects of plan settlements – – Experience gains (+)/losses (–) Other – – on plan assets 10 – 6 – 7 – 1 3 Pension expense 81 78

In accordance with IAS 19.92, actuarial gains and losses are only Group Management Report Gains and losses on defined benefit obligation recognized if they exceed the greater of 10 % of the present value 2009 2008 2007 2006 2005 of the obligation and 10 % of the fair value of the plan assets. The €m €m €m €m €m excess amount is amortized over the remaining working lives of the active employees and recognized in income. A gain of €9 million Experience gains (+)/losses (–) was recognized in the income statement in 2009 (previous year: on defined benefit obligations – 20 0 33 – 12 – 13 €7 million). Increase (+)/decrease (–) in defined benefit obligations arising from changes in assumptions – 98 53 177 91 – 60 Total actuarial gains (+)/ Consolidated Financial Statements losses (–) on defined benefit obligations – 118 53 210 79 – 73 Other Information

129 Fiscal Year I Consolidated Financial Statements I Notes

(35) Other provisions The other provisions changed as follows in the year under review:

Balance at Changes in Utilization Reversal Additions Balance at Jan. 1, 2009 basis of Dec. 31, 2009 consolidation €m €m €m €m €m €m

Provisions for home savings business 715 – 126 4 173 758 Staff-related provisions 86 – 20 1 30 95 Provisions for credit risks 48 – 6 14 14 42 Risk compensation amounts of the Post- beamtenkrankenkasse (Postal Civil Service Health Insurance Fund) 3 – 1 – – 2 Miscellaneous 137 – 58 17 85 147

Total 989 – 211 36 302 1,044

The addition to the staff-related provisions item relates to restructur ing measures.

€715 million (previous year: €685 million) of recognized provisions is due after more than 12 months.

Provisions for home savings business changed as follows in the year under review:

Balance at Utilization Reversal Additions Balance at Jan. 1, 2009 Dec. 31, 2009 €m €m €m €m €m

Provisions for home savings business for interest premiums 544 94 – 143 593 for reimbursement claims from arrangement fees 92 16 – 8 84 for changes in interest rates 71 15 – 17 73 Miscellaneous 8 1 4 5 8

Total 715 126 4 173 758

Miscellaneous other provisions include provisions for litigation costs amounting to €17 million (previous year: €15 million), provisions for jubilee benefits amounting to €10 million (previous year: €8 million) and provisions for year-end closing costs amounting to €4 million (previous year: €3 million).

(36) Current and deferred tax liabilities

Balance at Utilization Reversal Additions Balance at Jan. 1, 2009 Dec. 31, 2009 €m €m €m €m €m

Current taxes 192 74 11 67 174 Deferred taxes1 1,091 – 2,158 1,372 305

Total 1,283 74 2,169 1,439 479

112 1Prior-period figures restated (see Note 6)

130 Fiscal Year I Consolidated Financial Statements I Notes

Provisions for current taxes relate to current payment obligations (38) Subordinated debt to the tax authorities. Dec. 31, 2009 Dec. 31, 2008 Deferred tax liabilities relate to the following balance sheet items: €m €m

Dec. 31, 2009 Dec. 31, 20081 Subordinated liabilities 2,589 2,774 €m €m Hybrid capital instruments 1,681 1,687

Profit participation certificates outstanding 1,224 1,237 For our Shareholders An unsere Investoren Assets Contributions by typical silent partners 13 38 Loans and advances 290 305 Allowance for losses on loans Total 5,507 5,736 and advances – – Trading assets 3,312 1,921 Subordinated debt only includes financial instruments classified as Hedging derivatives 65 110 liabilities at amortized cost. Investment securities 1,080 1,486 Property and equipment 6 3 €5,241 million (previous year: €5,426 million) of subordinated debt Other assets 272 167 is due after more than 12 months.

Liabilities Our Business Divisions Unsere Geschäftsfelder Amounts due to other banks Due to the current maturity structure, only €3,348 million (previous and customers 150 111 year: €3,597 million) of the items reported as subordinated debt Trading liabilities – – represents liable capital in accordance with the Basel Capital Accord. Hedging derivatives – – Provisions for pensions and The interest expense on subordinated liabilities amounts to €119 other employee benefits 11 8 million (previous year: €157 million). Deferred interest not yet due Other provisions 153 30 amounting to €27 million (previous year: €42 million) is carried as Other liabilities 70 256 subordinated debt under subordinated liabilities. Our Responsibility Our Responsibility 5,409 4,397 Hybrid capital instruments represent four issues in the form of Class B preferred securities that were issued by subsidiaries established for Netted against deferred tax assets 5,104 3,306 this purpose. The Class B preferred securities of Postbank Funding LLC I to IV are issued for an unlimited term and represent Tier 1 capital Total 305 1,091 for banking regulatory purposes.

Deferred interest on hybrid capital instruments not yet due amounted (37) Other liabilities to €23 million (previous year: €13 million); it is reported in hybrid capital instruments. Dec. 31, 2009 Dec. 31, 2008 €m €m Holders of profit participation certificates receive an annual profit- Group Management Report related distribution ranking prior to shareholders’ profit rights; the Liabilities from other taxes 231 243 distribution right is reduced if and to the extent that no distributable Trade payables 118 189 profit is available. Liabilities from expenses for management bonuses 68 79 The interest expense for 2009 on profit participation certificates out- Liabilities from expenses for standing totals €58 million (previous year: €58 million). Deferred outstanding invoices 55 56 interest not yet due amounting to €45 million (previous year: €12 Deferred income 54 45 million) is allocated directly to profit participation certificates Liabilities from expenses for outstanding. commissions and premiums 50 52 Liabilities from expenses for outstanding vacation entitlements and other Due to their contractual arrangements and economic substance, con- Consolidated Financial Statements compensated absences 43 54 tributions by typical silent partners represent debt and are reported Miscellaneous liabilities 92 108 under subordinated debt in accordance with IAS 32.

Total 711 826 A total of €2,010 million of the subordinated debt (previous year: €2,183 million) is hedged against changes in fair value; of this figure €329 In the previous year, trade payables due to Deutsche Post AG were million (previous year: €496 million) is attributable to subordinated recognized separately. liabilities and €1,681 million (previous year: €1,687 million) to hybrid capital instruments. Other Information €49 million (previous year: €64 million) of other liabilities is due after 112 more than 12 months. 1Prior-period figures restated (see Note 6)

131 Fiscal Year I Consolidated Financial Statements I Notes

€4.8 billion of subordinated debt (previous year: €4.4 billion) is fixed-inter- of convertible bonds and/or bonds with warrants, income bonds, est, while €0.7 billion (previous year: €1.3 billion) is variable-interest. and/or profit participation rights (Contingent Capital II).

The Management Board was authorized at the Annual General (39) Equity Meeting on April 22, 2009 to purchase own shares for the purposes of securities trading in accordance with section 71 (1) no. 7 of the Dec. 31, 2009 Dec. 31, 20081 Aktiengesetz (AktG – German Stock Corporation Act) up to a total of €m €m 5 % of the relevant share capital, or for other purposes in accordance with section 71 (1) no. 8 of the AktG up to a total of 10 % of the Issued capital 547 547 share capital. In accordance with the legal provisions, the aggregate Share premium 2,010 2,010 number of own shares held may not account for more than 10 % of the share capital. The authorizations took effect at the end of the Retained earnings 3,267 4,153 Annual General Meeting and are valid until October 21, 2010. Foreign currency translation reserve –151 –151 The authorization to purchase own shares in accordance with section Revaluation reserve –502 –724 71 (1) no. 8 of the AktG existing at the time of the Annual General Retained earnings 2,614 3,278 Meeting, which was valid for a limited period until November 7, 2009, is revoked as of the time when the new authorization became effective. Consolidated net profit/loss 76 – 886 Minority interest 4 3 The gains or losses on the measurement of available-for-sale financial instruments reported in the revaluation reserve in equity changed as follows: Total 5,251 4,952 Available-for-sale Postbank’s issued capital (€547 million) is composed of 218,800,000 financial instruments no-par value registered shares. 2009 2008 €m €m Premiums from the issue of shares are reported in the share premium. Balance at January 1 – 724 – 556 Remeasurement gains/losses 106 – 979 Undistributed profits from previous years are reported under retained Available for sale, hedged earnings. (due to changes in credit risk) 102 28 Available for sale, unhedged 4 – 1,007 The foreign currency translation reserve contains the translation gain Disposals and impairment 199 777 or loss from the consolidation of the subsidiaries reporting in foreign Impairment 56 136 currency that arose as a result of acquisition accounting. thereof available for sale 48 136 thereof loans and receivables 8 – The profit or loss from the measurement of investment securities at Disposal/hedge termination 21 650 fair value after deduction of deferred taxes is reported in the revalu- thereof available for sale – 3 650 ation reserve. Any profit or loss is not recognized in the income thereof loans and receivables 24 – statement until the asset has been sold or impaired. Writedown effect in net interest income 122 – 9 By way of a resolution adopted by the Annual General Meeting on thereof available for sale 51 11 April 22, 2009, the Management Board was authorized, with the consent thereof loans and receivables 71 – 20 of the Supervisory Board, to increase the Bank’s share capital on Income tax recognized directly in equity – 83 34 one or more occasions in whole or in part by up to a total of €273.5 Balance at December 31 – 502 – 724 million up to April 21, 2014 by issuing new no-par value registered shares against cash and non-cash contributions including mixed An amount of €77 million (previous year: €786 million) carried in the non-cash contributions (Authorized Capital). revaluation reserve was reversed to income from disposals of and impairment on available-for-sale financial instruments and financial The shareholders are generally granted pre-emptive subscription rights. instruments reclassified out of the available-for-sale to the loans and The Management Board is authorized, with the consent of the receivables category in the year under review. The writedown effect of Supervisory Board, to determine the additional details of the capital these financial instruments led to a reversal of €122 million from the increase and its implementation. revaluation reserve to income (previous year: €– 9 million). In addition, the revaluation reserve increased by €106 million (previous year: de The Annual General Meeting on April 22, 2009 approved the contingent crease of €979 million) due to the remeasurement of available-for-sale increase in share capital by up to €164.1 million by issuing up to financial instruments. Income tax recognized directly in equity changed 65,640,000 new no-par value registered shares (Contingent Capital I). by €– 83 million (previous year: €34 million) in the fiscal year under Furthermore, the share capital was increased by up to 109,400,000 review, resulting in a closing balance of €251 million (previous year: no-par value registered shares to be granted to the holders or creditors €334 million); the revaluation reserve increased by a corresponding amount. 112 1Prior-period figures restated (see Note 6)

132 Fiscal Year I Consolidated Financial Statements I Notes

Other disclosures

(40) Segment reporting

Segment reporting by business division

1 1

Retail Banking Corporate Banking Transaction Banking Financial Markets Others Consolidation Group For our Shareholders An unsere Investoren 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 €m €m €m €m €m €m €m €m €m €m €m €m €m €m Net interest income 2,141 2,226 543 386 1 4 125 162 – 496 – 281 91 – 2 2,405 2,495 Net trading income – 32 25 – 140 – 92 – – 47 – 6 – 282 – 325 – 91 9 – 498 – 389 Net income from investment securities – – 2 – 51 – 241 – – – 21 – 110 – 76 – 895 – – 1 – 148 – 1,249 Net fee and commission income 1,113 1,178 104 107 322 340 27 57 – 42 – 33 – 195 – 218 1,329 1,431 Balance-sheet related revenues 3,222 3,427 456 160 323 344 178 103 – 896 – 1,534 – 195 – 212 3,088 2,288

Administrative Our Business Divisions

expenses – 2,136 – 2,220 – 180 – 171 – 317 – 312 – 90 – 92 – 922 – 973 781 799 – 2,864 – 2,969 Unsere Geschäftsfelder Allowance for losses on loans and advances – 345 – 304 – 300 – 143 – – – 33 – 22 – – 29 – – – 678 – 498 Other income/expenses 29 26 – 2 1 33 16 5 – 3 577 662 – 586 – 587 56 115 Profit/loss before tax 770 929 – 26 – 153 39 48 60 – 14 – 1,241 – 1,874 0 0 – 398 – 1,064 Revenues from external customers 3,204 3,411 453 156 142 155 177 81 – 883 – 1,501 Intersegmental revenues 18 16 3 4 181 189 1 22 – 13 – 33 Depreciation and amortization – 19 – 21 – 1 – 1 – 6 – 2 – 2 – 2 – 110 – 116 Our Responsibility Impairment losses – 19 – 21 – 1 – 1 – 6 – 2 – 2 – 2 – 135 – 160 Reversal of impairment losses 0 2 0 0 0 0 0 0 7 0 Cost/income ratio (CIR) 66.3 % 64.8 % 39.5 % 106.9 % 98.1 % 90.7 % 50.6 % 89.3 % – – 92.7 % 129.8 % Return on equity before taxes (RoE) 34.9 % 41.9 % – 4.8 % – 37.4 % 8.1 % – 2.2 % –78.6 % –145.9 % – 7.8 % – 23.3 % Segment assets 89,882 87,048 34,679 28,650 399 351 30,710 31,437 101,506 115,812 – 30,567 – 32,079 226,609 231,219 Segment liabilities 119,754 107,579 29,684 23,023 399 351 28,379 27,113 78,960 105,232 – 30,567 – 32,079 226,609 231,219

The Postbank Group manages its activities on the basis of a manage- estate, constitutes the second important pillar of the corporate bank- Group Management Report ment information system whose core component is management ing business in national and international terms. accounting by business division. The business divisions correspond to the Group’s organizational structure. Factoring, leasing, and logistics finance also belong to this business division. In the Retail Banking business division, Postbank offers private and business customers a broad spectrum of banking and financial serv- The result of this segment comprises the corporate banking business ices. The product range encompasses checking and savings products, at Deutsche Postbank AG, PB Firmenkunden AG, PB Capital Corp., credit and debit cards, mortgage lending, installment credits, the Postbank Leasing GmbH, PB Factoring GmbH, the London branch, home savings business, securities and securities accounts, and invest- and Deutsche Postbank International S.A. ment funds. Income from brokerage activities is also reported in this segment. The Transaction Banking business division offers organizational and Consolidated Financial Statements technical settlement and processing services for the Group as well The result of this segment comprises the operating results of Deutsche as for other banks in the area of domestic and cross-border payment Postbank AG‘s Retail Banking, the BHW subgroup, Postbank Filial transaction services. vertrieb AG, and VÖB-ZVD Bank für Zahlungsverkehrsdienstleistungen GmbH. In addition, the result of purchase price allocation from the Proprietary trading activities and Deutsche Postbank International S.A.’s acquisition of BHW has been allocated to the Retail Banking segment activities conducted from Luxembourg (excluding corporate banking) for the first time in the financial statements for fiscal year 2009. as well as fund management in general and for a number of Postbank’s Other Information

Postbank‘s Corporate Banking business division provides payment 112 transaction services. Commercial finance, especially regarding real 1Prior-period figures restated (see Note 6)

133 Fiscal Year I Consolidated Financial Statements I Notes

retail funds and special funds (Deutsche Postbank Privat Investment In addition to the results in the income statement of the business Kapitalanlagegesellschaft GmbH (PPI) and Deutsche Postbank Finan- units allocated to the business divisions, imputation procedures cial Services GmbH) are allocated to the Financial Markets business are applied to ensure correct allocation of the segment results. division. PPI, which was sold in the third quarter of 2009, is included In accordance with IFRS 8.23 we report net interest income (net in the Financial Markets segment at the result generated up to this interest revenue) instead of interest income and interest expense. date. The Others segment includes the proceeds of sale from this The allocation of net interest income from customer products to the transaction. segments uses the market rate method, under which the customer interest rate is compared with imputed money and capital market rates Consolidation items have been reported separately in the financial for matching terms. The administrative expenses of the Deutsche statements for fiscal year 2009 for the first time. These comprise Postbank AG units included in the segment results are primarily based Group consolidation less intra-segment consolidation adjustments. on the results of cost center accounting. The amount of the allowance for losses on loans and advances is determined for the first time on The Others segment contains items not attributable to the businesses, the basis of the actually recognized allowance for losses on loans unallocated overhead costs, and the result of Postbank’s own-account and advances in the financial statements for fiscal year 2009. Income transactions. The net interest expense is due among other things to taxes are not calculated on segment level. disposals of banking and trading book assets, asset/liability manage ment, the transfer pricing system in place up to and including 2004, The retrospective adjustment of the allowance for losses on loans and and the acquisition of the BHW Group and Filialvertrieb. The following advances in fiscal year 2008 in the amount of €90 million impacts the table contains other key earnings components for this segment. profit/loss before tax of the Corporate Banking segment.

2009 2008 Reversal of impairment losses and impairment losses relate to intangible €m €m assets and property and equipment. Both amortization/depreciation and impairments are taken into account. The amortization of intangible Net trading income – 282 – 325 assets does not include any write-downs (previous year: €23 million). of which In the fiscal year under review impairment losses on property and Net loss on embedded derivatives from structured credit products – 468 – 645 equipment in the amount of €25 million (previous year: €21 million) Net gain/loss on capital-guaranteed were recognized. The impairment losses impact the Others segment. promissory note loans (CPPI structures) 33 – 133 Equity is allocated to the segments according to their risk capital Other promissory note loans – – 31 requirements. Risk capital requirements are derived from Postbank‘s Asset/liability management 100 554 risk cover amount and define the extent of the permitted exposures Other items 53 – 70 to market risk, credit risk, operational risk, business risk, investment Net income from investment securities – 76 – 895 and real estate risk, and collective risk. The average IFRS equity is of which allocated to the segments according to their respective responsibility Net loss on structured credit for the risk capital positions within the individual risk types. products – 90 – 82 Other debt instruments – 66 – 107 Since the settlement of payment transactions is not banking business Writedowns of retail funds – 30 – 97 in the traditional sense, we do not report the return on equity in our Sale of BHW Bank credit portfolio – 30 Transaction Banking business division. Reduction of equities portfolio – – 576 Other items 110 – 63 The allocation of assets and liabilities to the segments is based on the segments’ operating activities. The balance sheet items of the Administrative expenses – 922 – 973 subsidiaries as well as the assets and liabilities relating to customer of which products are allocated to the business divisions by product/customer Cost of central services – 329 – 240 category. The imputed measurement rates used in the market rate IT and other services – 424 – 456 method do not result in any additional imputed asset positions. Other items – 169 – 277 As a result, the volumes of assets and liabilities recognized in the Other income/expenses 577 662 segments do not match. The Others segment comprises assets and of which liabilities from subsidiaries which have not been allocated to the IT and other services 419 456 operating segments and from Deutsche Postbank AG, e.g., from Other items 158 206 own-account transactions.

As compared to the 2008 Group Annual Report, the assets and In addition to the above-mentioned modifications, the Corporate Banking liabilities reported in the Others segment have been affected by the and Retail Banking segments recorded a negative net interest spread recognition of assets and liabilities in the Consolidation segment and resulting from cash holdings at the tellers’ counters and in ATMs for the the allocation of asset positions from the purchase price allocation first time in the financial statements for fiscal year 2009. Further modifi of BHW to the Retail Banking segment. cations were made as part of the product/customer segment-based allocation of income from electronic cash payments and of expenses from third-party loan brokerage activities within the Retail Banking segment.

134 Fiscal Year I Consolidated Financial Statements I Notes

The prior-year figures were adjusted. The total comprises the Postbank Group’s net interest income, net fee and commission income, net trading income, and net income from In 2008, excluding the retrospective adjustment of the allowance investment securities. Net interest income and net fee and commission for losses on loans and advances, the above-mentioned adjustments income of the subsidiaries attributable to the Corporate Banking to segment reporting resulted in the following changes to the profit segment are reported under the Deposits and loans for Retail and before tax: Retail Banking: up €17 million, Corporate Banking: down Corporate Banking customers item. The Others item also includes €5 million, Others: down €12million. the Group’s net trading income and net income from investment securities, and as a result also the significant effects from the For our Shareholders Company level disclosures financial markets crisis. An unsere Investoren The following table contains information about income per product or service: The results of the geographical regions are calculated using the profit and loss as reported in the income statement of the legal entities and Dec. 31, 2009 Dec. 31, 2008 branches attributable to the regions. €m €m The Others segment contains the entities from the Europe, U.S.A. Deposits and loans for Retail and (PB Capital), and Asia (Postbank Home Finance) regions. The London Corporate Banking customers 2,703 2,749 branch, the Luxembourg entities Deutsche Postbank International S.A. Payment transaction services for Retail and Deutsche Postbank Vermögensmanagement S.A., and the Our Business Divisions

and Corporate Banking customers 414 404 Unsere Geschäftsfelder branches of BHW in Italy, Luxembourg, and Belgium form part of the Retail and Corporate Banking fee and commission income 553 596 Europe region. The prior-year figures were adjusted in particular to Transaction Banking insourcing account for the period shift of the allowance for losses on loans and (net fee and commission income) 141 150 advances. Others –723 – 1,611 Germany comprises all domestic business units including all consoli- Total 3,088 2,288 dation adjustments.

The regions’ assets and liabilities are reconciled in full to total assets Our Responsibility Our Responsibility and total equity and liabilities. The prior-year figures have been adjusted accordingly.

Assets Liabilities Income Loss/profit before tax1 2009 2008 2009 2008 2009 2008 2009 2008 €m €m €m €m €m €m €m €m

Germany 189,399 192,908 189,399 192,908 2,892 2,391 – 312 – 797 Others 37,210 38,311 37,210 38,311 196 – 103 – 86 – 267 Europe 29,077 30,241 29,077 30,241 267 123 96 40 U.S.A. 7,483 7,505 7,483 7,505 – 93 – 242 – 195 – 317 Asia 650 565 650 565 22 16 13 10 Group Management Report

Total 226,609 231,219 226,609 231,219 3,088 2,288 – 398 – 1,064

Non-current assets comprise intangible assets, property and equipment, and investment property.

Non-current assets Dec. 31, 2009 Dec. 31, 2008 €m €m

Germany 3,269 3,313 Consolidated Financial Statements Others 10 10 Europe 6 6 U.S.A. 3 3 Asia 1 1

Total 3,279 3,323 Other Information

112 1Prior-period figures restated (see Note 6)

135 Fiscal Year I Consolidated Financial Statements I Notes

(41) Contingencies and other obligations (42) Fair values of financial instruments Contingent liabilities arise from past events that will lead to possible Fair value hierarchy future obligations. These obligations arise from the occurrence of While financial instruments are measured in accordance with IAS 39, uncertain future events whose settlement amount cannot be estimated Postbank uses the three-level fair value hierarchy in accordance with with sufficient reliability. IFRS 7 for financial instruments measured at fair value.

Dec. 31, 2009 Dec. 31, 2008 Level 1: €m €m This comprises listed securities and exchange-traded derivatives as well as all spot currency transactions. Contingent liabilities on guarantees and warranties 1,105 1,296 Level 2: Other obligations This category includes financial instruments whose value is calculated irrevocable loan commitments 9,857 11,142 solely using observable market inputs that are highly relevant for of which: building loans provided 2,641 3,610 calculating fair value. These include non-exchange-traded derivatives miscellaneous obligations 12,107 12,063 (e.g. swaps, caps, floors, CDSs) as well as bonds and promissory note loans that are valued using observable yield and spread curves and Total 23,069 24,501 volatilities.

Miscellaneous obligations relate to credit lines which can be called in Level 3: at any time. Contingencies and other obligations were reduced by the This comprises financial instruments with valuation techniques whose allowance for losses on loans and advances recognized. key inputs are not observable in the market. Such valuation techniques are particularly used to measure structured credit products.

The following table allocates the individual categories of financial instruments to the corresponding level of the fair value hierarchy:

Assets measured at fair value Dec. 31, 2009 Fair value reported in:

Dec. 31, 2009 Level 1 Level 2 Level 3 Classes €m €m €m €m

Financial assets at fair value through profit or loss (FVtPL) Trading assets 20,471 579 19,885 7 Hedging derivatives 520 0 520 0 Loans and advances to customers 8,635 0 8,635 0 of which private mortgage lending 8,635 0 8,635 0 of which home savings loans 0 0 0 0 of which commercial loans 0 0 0 0 of which public-sector receivables 0 0 0 0 of which installment loans 0 0 0 0 of which other loans and advances 0 0 0 0

Available-for-sale financial assets Investment securities 12,885 6,793 2,831 3,261 Loans and advances to other banks 0 0 0 0 of which securities repurchase agreements 0 0 0 0 of which overnight money 0 0 0 0 of which loans 0 0 0 0 of which registered bonds 0 0 0 0 of which term deposits 0 0 0 0 of which other loans and advances 0 0 0 0

Total 42,511 7,372 31,871 3,268

136 Fiscal Year I Consolidated Financial Statements I Notes

Liabilities measured at fair value Dec. 31, 2009 Fair value reported in:

Dec. 31, 2009 Level 1 Level 2 Level 3 Classes €m €m €m €m

Financial liabilities at fair value through profit or loss (FVtPL) Trading liabilities 22,434 2 21,326 1,106 For our Shareholders Hedging derivatives 2,051 0 2,051 0 An unsere Investoren

Total 24,485 2 23,377 1,106

Financial instruments classified as trading assets, trading liabilities, CDOs, consumer ABSs, commercial ABSs, CMBSs, and RMBSs where and hedging derivatives are, for the most part, measured using indicative prices cannot be verified. Embedded derivatives must be valuation techniques that are allocable to Level 1 or Level 2. Separable separated from synthetically structured credit products and its change embedded derivatives from structured credit products are also classified in value be reported in net trading income. The fair values of these as trading assets or trading liabilities, however, they are measured embedded derivatives are also calculated using this internal simulation Our Business Divisions here using valuation techniques allocable to Level 3. Where quoted model. The model is based on the discounted cash flow method Unsere Geschäftsfelder market prices in an active market exist for these financial instruments, (similar to S&P’s CDO Evaluator, Moody’s CDO Net, and Fitch Vector); they are measured using this quoted price (IAS 39.AG71) and are this is based on the calculation of a portfolio loss distribution, taking therefore allocated to Level 1 in accordance with IFRS 7. If no such the individual securitization structure into account. The cash flows price exists for a financial instrument, it is measured using recent resulting from such products are forecasted, taking into account the transactions in identical financial instruments or transactions in similar respective risks from the securitized portfolios and the structure of the financial instruments (IAS 39.AG72) at the valuation date. For purposes securitizations, and are discounted using discount rates for equivalent of notes disclosure, financial instruments so measured are presented in maturities and risks. For this purpose default events relating to the Level 2 in accordance with IFRS 7. If no such comparative information underlyings in the pool designated as collateral are identified using a Our Responsibility Our Responsibility is available, the financial instruments are measured on the basis of simulation technique and included in the invested tranche via a the following valuation models (IAS 39.AG73 ff.). A significant proportion waterfall or counted towards the current buffer. The Merton model is of the above-mentioned financial instruments are measured using the used to detect default for each underlying. The default thresholds are discounted cash flow method, which mainly uses yield and spread defined using the cumulative probability of default (Moody‘s) of the curves (credit spreads, basis spreads) as inputs. In addition, CDS spreads rating categories or using the development of the expected loss over and hazard rates are used to value credit derivatives. Option pricing time (RMBS/retail). The model uses current ratings as its starting models also use share prices, index prices, and volatilities as inputs. point, plus recovery rates that depend on the seniority of the underlyings The above-mentioned financial instruments are also presented under to model losses. To model RMBS losses, current detailed information Level 2 because the input parameters for the valuation techniques for on delinquencies is used where available. In addition to current the aforementioned financial instruments are essentially based on interest rates and exchange rates, liquidity spreads are defined in observable market inputs. keeping with the current market environment, e.g., using iTraxX and Group Management Report CDX. The valuation technique makes maximum use of market inputs The Postbank Group applies the fair value option exclusively to loan in accordance with IAS 39.48A. Financial instruments which are portfolios in the mortgage lending business. Fair values are measured measured using this valuation technique in accordance with IAS 39 using the discounted cash flow method. The current swap yield curve are recognized as Level 3 fair values. In individual cases, the actual and loan-specific risk premiums are used as inputs. The risk premiums values may differ from the assumptions and estimates made. are calculated on the basis of the estimated loss rates and probabilities of default; these are sourced from the Bank’s internal and supervisory Due to the activity observed by Postbank in the European government authority authorized rating model. bonds, Pfandbriefe, bank and corporate bonds market segments in the third and fourth quarters, significant volumes of financial assets Investment securities belonging to the IFRS “available for sale” were transferred between Level 1 and Level 2 in fiscal year 2009. category are generally measured using published transaction or Whereas Postbank measured these market segments on the basis of Consolidated Financial Statements quoted market prices and therefore generally allocated to Level 1 for an internal valuation model until the above-mentioned dates, they notes disclosure purposes. If no such prices exist, they are measured are now valued using observable quoted prices and a notional using valuation techniques (generally the discounted cash flow amount of €1.0 billion with a fair value of €1.0 billion has been method). Depending on the inputs used, the valuation techniques and reclassified from Level 2 to Level 1. There were no further significant the resulting fair values are allocated to Level 2 or Level 3. transfers between Level 1 and Level 2 in fiscal year 2009.

Due to limited market liquidity, market-based indications of fair value Valuation techniques that are allocable to Level 3 due to the input are often unavailable in particular for structured credit products parameters used are used for both assets and liabilities. For liabilities Other Information (securitization products). Internal valuation techniques are used to only the embedded derivatives from the synthetic SCP portfolios measure the fair value of structured credit products (SCPs) such as allocable to Level 3 are subjected to fair value measurement.

137 Fiscal Year I Consolidated Financial Statements I Notes

Financial assets allocable to Level 3 developed as follows in fiscal year 2009:

Assets measured at fair value based on Level 3 Dec. 31, 2009 Assets measured at fair value in Level 3

Financial assets at FVtPL AfS financial assets Total Trading assets Hedging Loans and advan- Investment Loans and derivatives ces to customers securities advances to other banks €m €m €m €m €m €m

Opening balance 10 0 0 3,280 0 3,290 Total gains or losses – 3 0 0 165 0 162 in profit or loss – 3 0 0 4 0 1 in other comprehensive income 0 0 0 161 0 161 Purchases 0 0 0 95 0 95 Disposals 0 0 0 – 72 0 – 72 Issues 0 0 0 0 0 0 Settlements 0 0 0 – 181 0 – 181 Exchange rate effects 0 0 0 – 26 0 – 26 Transfers out of Level 3 0 0 0 0 0 0 Transfers to Level 3 0 0 0 0 0 0

Closing balance 7 0 0 3,261 0 3,268 Total gains or losses for the period included in profit or loss for assets held at the end of the reporting period 10 0 0 – 2 0 8

This change is due to the following reasons:

The decisive factors for the above development of financial assets allocated to Level 3 are settlements and/or redemption of receivables and exchange rate effects. In contrast to that are acquired assets (underlyings) from a securitization structure so that financial assets decreased by approximately €22 million.

Level 3 assets are reported as follows in the income statement:

Assets measured at fair value based on Level 3 Dec. 31, 2009 Gains/losses for the period Net trading Net income Net gains/losses Other recognized in: income from investment on hedges comprehensive securities income €m €m €m €m

Total gains/losses recognized in profit or loss/ other comprehensive income – 3 4 0 161 Total gains/losses recognized in profit or loss/ other comprehensive income for assets held at the end of the reporting period 10 – 2 0 135

138 Fiscal Year I Consolidated Financial Statements I Notes

Level 3 financial liabilities changed as follows in fiscal year 2009:

Liabilities measured at fair value based on Level 3 Dec. 31, 2009 Fair value reported in Level 3 Financial liabilities at FVtPL Trading liabilities Hedging derivatives Total €m €m €m For our Shareholders

Opening balance 702 0 702 An unsere Investoren Total losses 0 0 0 in profit or loss 498 0 498 Purchases 0 0 0 Disposals – 61 0 – 61 Issues 0 0 0 Settlements – 33 0 – 33 Transfers out of Level 3 0 0 0 Transfers to Level 3 0 0 0 Our Business Divisions Closing balance 1,106 0 1,106 Unsere Geschäftsfelder

Total gains/losses for the period included in profit or loss for liabilities held at the end of the reporting period – 454 – 454

This development is due to the following reasons: When determining fair values using the internal valuation model for structured credit products, the illiquidity of the markets for structured The decisive factors for the above-mentioned development of financial products is taken into account in addition to the default-related liabilities attributable to Level 3 are measurements of negative fair impairment of expected cash flows. This is done by adding a premium Our Responsibility Our Responsibility values which in the case of structured credit products affect embedded to the risk-free interest rate for the same maturity when discounting derivates (allocated to trading liabilities) in full. the above-mentioned cash flows. A degradation (improvement) in the default-related impairment due to a change in the probability of Level 3 liabilities are reported in the income statement as follows: default by one rating category notch would result in a decrease (increase) in the fair values of the portfolios measured using the Liabilities measured at fair value based on Level 3 internal valuation model (notional value of around €3.7 billion) of Dec. 31, 2009 about 6.3 % (about 4.9 %). An increase (decrease) of 1 basis point in the liquidity spreads used would result in a decrease (increase) in Gains/losses for the period Net trading Net gains/losses the fair values of approximately 3.2 basis points. recognized in: income on hedges €m €m

Total losses recognized in profit or Group Management Report loss/in other comprehensive income 498 0 Total gains/losses for the period included in profit or loss for liabilities held at the end of the reported period – 454 0 Consolidated Financial Statements Other Information

139 Fiscal Year I Consolidated Financial Statements I Notes

Fair value of financial instruments carried at amortized cost (43) Revenue and expense items, gains and losses as defined or hedge fair value by IFRS 7, and financial instruments in accordance with The fair values of financial instruments carried at amortized cost or the measurement categories as defined by IAS 39 hedge fair value on the balance sheet are compared with their carrying amounts in the following table: Note 2009 2008 €m €m Dec. 31, 2009 Dec. 31, 2008

Carrying Full fair Carrying Full fair Interest income and expense (7) amount value amount value Loans and receivables 7,547 8,195 €m €m €m €m Available for sale 386 1,403 Held to maturity 5 24 Assets Liabilities at amortized cost – 4,799 – 7,240 Cash reserve 4,534 4,534 3,417 3,417 Loans and Net gains or losses (10), (11) advances to other banks Held for trading – 471 – 394 (loans and Designated as at fair value – 20 11 receivables) 14,467 14,360 18,616 18,424 Loans and receivables – 109 – 456 Loans and Available for sale – 44 – 786 advances to customers (loans and receivables) 102,408 107,406 96,713 100,099 Allowance for losses on loans and advances – 1,641 – 1,641 – 1,323 – 1,323 Investment securities (loans and receivables) 59,401 58,116 68,859 67,754 Investment securities (held to maturity) 73 73 186 186

179,242 182,848 186,468 188,557

Liabilities Deposits from other banks (liabilities at amortized cost) 39,318 39,198 62,790 62,476 Due to customers (liabilities at amortized cost) 131,988 132,817 117,472 118,009 Debt securities in issue and subordinated debt 22,229 21,545 22,078 20,496

193,535 193,560 202,340 200,981

In general, fair value is calculated for all financial instruments. The only exceptions are items payable on demand and savings deposits with an agreed withdrawal notice of one year or less.

140 Fiscal Year I Consolidated Financial Statements I Notes

Fair value hedges/option Unhedged Total

Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 €m €m €m €m €m €m

Assets 39,439 50,489 179,421 173,618 218,860 224,107

Loans and receivables 26,221 33,935 150,055 150,253 176,276 184,188 For our Shareholders An unsere Investoren Loans to other banks 547 863 13,920 17,753 14,467 18,616 Loans to customers 2,079 1,754 100,329 94,959 102,408 96,713 Investment securities 23,595 31,318 35,806 37,541 59,401 68,859 Available for sale 3,866 7,290 9,019 6,791 12,885 14,081 Loans and advances to other banks – – – 68 – 68 Investment securities 3,866 7,290 9,019 6,723 12,885 14,013 Held to maturity – – 73 186 73 186 Investment securities – – 73 186 73 186 Our Business Divisions

Held for trading 197 185 20,274 16,388 20,471 16,573 Unsere Geschäftsfelder Trading assets 197 185 20,274 16,388 20,471 16,573 Fair value option 8,635 8,605 – – 8,635 8,605 Loans to customers 8,635 8,605 – – 8,635 8,605 Hedging derivatives 520 474 – – 520 474

Liabilities 14,138 12,117 203,882 209,903 218,020 222,020

Liabilities at amortized cost 11,105 8,652 182,430 193,688 193,535 202,340 Our Responsibility Our Responsibility Deposits from other banks 546 368 38,772 62,422 39,318 62,790 Due to customers 3,099 476 128,889 116,996 131,988 117,472 Debt securities in issue 5,450 5,625 11,272 10,717 16,722 16,342 Subordinated debt 2,010 2,183 3,497 3,553 5,507 5,736 Held for trading 982 772 21,452 16,215 22,434 16,987 Trading liabilities 982 772 21,452 16,215 22,434 16,987 Hedging derivatives 2,051 2,693 – – 2,051 2,693

(44) Derivatives The Postbank Group uses derivatives to hedge positions as part of Group Management Report its asset/liability management policy. They are also entered into for trading purposes.

Postbank’s foreign currency financial derivatives consist for the most part of forward exchange transactions, currency swaps, cross currency swaps, and currency options. Interest rate derivatives primarily comprise interest rate swaps, forward rate agreements as well as interest rate futures and options; in isolated cases, fixed-income forwards are also entered into. The equity derivatives entered into mainly take

the form of equity options and stock/index futures. Credit derivatives Consolidated Financial Statements (credit default swaps) are mainly separated derivatives of synthetic CDOs.

The notional amounts represent the gross volume of all sales and purchases. The notional amount is a reference value for determining reciprocally agreed settlement payments; it does not represent recognizable receivables or liabilities.

The fair values of the individual contracts were calculated using rec- Other Information ognized valuation models and do not reflect any netting agreements.

141 Fiscal Year I Consolidated Financial Statements I Notes

Holdings of derivatives are composed of the following items:

Notional amount Positive fair values Negative fair values

Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 €m €m €m €m €m €m

Trading derivatives 802,735 665,517 19,287 15,853 22,434 16,987 Hedging derivatives 39,331 46,557 520 474 2,051 2,693

Total 842,066 712,074 19,807 16,327 24,485 19,680

The following table presents the open interest-rate and foreign currency, conditional and unconditional forward and option contracts of the Postbank Group at the balance sheet date.

Fair value Notional amount Positive fair values Negative fair values

Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 €m €m €m €m €m €m

Trading derivatives Foreign currency derivatives OTC products Currency forwards 6,561 4,858 90 168 85 106 Currency swaps 21,209 32,129 111 907 235 859

Total holdings of foreign currency derivatives 27,770 36,987 201 1,075 320 965

Interest rate derivatives OTC products Interest rate swaps 676,514 601,810 18,904 14,405 20,694 15,034 Cross currency swaps 577 384 15 59 11 10 Forward rate agreements 81,591 12,028 18 18 25 11 OTC interest rate options 934 866 7 3 4 3 Other interest rate contracts 884 117 5 1 7 1

Exchange-traded products Interest rate futures 8,502 4,938 – – – – Interest rate options 70 – – – – –

Total holdings of interest rate derivatives 769,072 620,143 18,949 14,486 20,741 15,059

142 Fiscal Year I Consolidated Financial Statements I Notes

Fair Value Notional amount Positive fair values Negative fair values

Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 €m €m €m €m €m €m

Equity/index derivatives

OTC products For our Shareholders An unsere Investoren Equity options (long/short) 193 337 2 20 19 11

Exchange-traded products Equity/index futures – 5 – – – – Equity/index options 141 25 6 1 – –

Total holdings of equity/index derivatives 334 367 8 21 19 11

Credit derivatives Our Business Divisions

Credit default swaps 5,559 8,020 129 271 1,354 952 Unsere Geschäftsfelder

Total holdings of credit derivatives 5,559 8,020 129 271 1,354 952

Total holdings of trading derivatives 802,735 665,517 19,287 15,853 22,434 16,987

of which: banking book derivatives 39,827 29,051 450 459 2,223 1,576 of which: derivatives relating to hedged items accounted for under Our Responsibility Our Responsibility the fair value option 31,728 24,994 197 185 982 772

Hedging derivatives Fair value hedges Interest rate swaps 37,834 41,967 469 346 2,024 2,641 Cross currency swaps 595 1,068 50 117 21 51 Credit default swaps 478 169 1 11 6 1 Interest rate futures 424 3,353 – – – –

Total holdings of hedging derivatives 39,331 46,557 520 474 2,051 2,693 Group Management Report

Total holdings of derivatives 842,066 712,074 19,807 16,327 24,485 19,680 Consolidated Financial Statements Other Information

143 Fiscal Year I Consolidated Financial Statements I Notes

Total holdings of recognized derivative assets and liabilities:

Hedging derivatives

Positive Positive Negative Negative fair values fair values fair values fair values Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 €m €m €m €m

Remaining maturity less than 3 months 161 113 346 391 3 months to 1 year 23 60 20 32 from 1 to 2 years 5 54 61 58 from 2 to 3 years 8 8 116 139 from 3 to 4 years 56 9 187 162 from 4 to 5 years 19 12 156 178 more than 5 years 248 218 1,165 1,733

520 474 2,051 2,693

Trading and banking book derivatives

Positive Positive Negative Negative fair values fair values fair values fair values Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 €m €m €m €m

Remaining maturity less than 3 months 4,791 4,736 5,452 5,251 3 months to 1 year 374 356 429 401 from 1 to 2 years 543 404 688 467 from 2 to 3 years 881 456 1,232 537 from 3 to 4 years 1,414 659 2,048 788 from 4 to 5 years 888 958 1,306 1,310 more than 5 years 10,396 8,284 11,279 8,233

19,287 15,853 22,434 16,987

The remaining maturity is the period between the balance sheet date and the contractual maturity of the asset or liability.

144 Fiscal Year I Consolidated Financial Statements I Notes

The following table presents the positive and negative fair values of derivatives by counterparties.

Positive fair values Negative fair values

Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008 €m €m €m €m For our Shareholders

Counterparties An unsere Investoren Banks in OECD countries 19,480 15,994 23,103 18,769 Public institutions in OECD countries – – – – Other counterparties in OECD countries 325 305 829 564 Non-OECD 2 28 553 347

19,807 16,327 24,485 19,680

(45) Bonds outstanding Our Business Divisions Unsere Geschäftsfelder

Dec. 31, 2009 Dec. 31, 2008 €m €m

Bonds outstanding Bonds issued 22,117 21,492 Registered mortgage Pfandbriefe issued as collateral – 10 Public-sector

Pfandbriefe / municipal bonds – 10 Our Responsibility

Cover requirement for bonds outstanding 22,117 21,512 Group Management Report Consolidated Financial Statements Other Information

145 Fiscal Year I Consolidated Financial Statements I Notes

(46) Cover for bonds outstanding

Cover assets Pfandbriefe Excess cover outstanding Dec. 31, 2009 Dec. 31, 2009 Dec. 31, 2009 €m €m €m

Mortgage Pfandbriefe Register A Principal amount 1,013 119 894 Present value 1,091 126 965

Public-sector Pfandbriefe Register B Principal amount 1,181 895 286 Present value 1,264 979 285

Bonds Register C (mixed cover) Principal amount 16,796 14,335 2,461 Present value 17,936 15,638 2,298

Mortgage Pfandbriefe Register D Principal amount 6,649 5,041 1,608 Present value 7,243 5,495 1,748

Public-sector Pfandbriefe Register E Principal amount 2,380 1,728 652 Present value 2,563 1,784 779

Cover assets Pfandbriefe Excess cover outstanding Dec. 31, 2008 Dec. 31, 2008 Dec. 31, 2008 €m €m €m

Mortgage Pfandbriefe Register A Principal amount 2,143 1,168 975 Present value 2,267 1,211 1,056

Public-sector Pfandbriefe Register B Principal amount 2,957 2,482 475 Present value 3,089 2,591 498

Bonds Register C (mixed cover) Principal amount 16,197 14,273 1,924 Present value 17,284 15,430 1,854

Mortgage Pfandbriefe Register D Principal amount 5,228 3,550 1,678 Present value 5,669 3,802 1,867

Public-sector Pfandbriefe Register E Principal amount 0 0 0 Present value 0 0 0

146 Fiscal Year I Consolidated Financial Statements I Notes

(47) Foreclosures and compulsory administration Gazette on July 24, 2009. According to this, unrealized gains and losses on debt instruments are to be disregarded when calculating regulatory Dec. 31, 2009 Dec. 31, 2008 capital pursuant to sections 10 and 10a of the Kreditwesengesetz Number Number (KWG – German Banking Act). This amendment has been required to be applied since the reporting date of June 30, 2009. Foreclosures pending 1,196 889 Compulsory administration proceedings 392 587 (50) Risk capital

Foreclosures completed 394 396 The risk cover amount available for covering all risks consists of the For our Shareholders An unsere Investoren bank’s capital less goodwill and its subordinated debt in accordance with IFRSs as well as parts of the other reserves and liabilities asso- (48) Foreign currency volume ciated with financial instruments including customer transactions, less net cost. Other reserves include additional reserves that are not Dec. 31, 2009 Dec. 31, 208 reported on the face and in the notes to IFRS-compliant financial €m €m statements. These are prorated checking and savings-related reserves as well as those of the BHW Bausparkasse AG home savings col Foreign currency assets 22,440 34,670 lective as determined by replication models. In order to account for Foreign currency liabilities 22,548 34,734 estimating uncertainties, conservative discounts and limit buffers are

used when calculating the risk cover amount. Our Business Divisions Unsere Geschäftsfelder

(49) Risk-weighted assets and capital ratio The regulatory capital requirements (regulatory capital adequacy in Postbank ensures the correct determination of liable capital and accordance with the Kreditwesengesetz (KWG – German Banking own funds at Group level. Its regulatory own funds in accordance Act), the Solvabilitätsverordnung (SolvV – German Solvency Regulation), with the Kreditwesengesetz (KWG – German Banking Act) and the and the Groß- und Millionenkreditverordnung (GroMiKV – German Solvabilitätsverordnung (SolvV – German Solvency Regulation) were Large Exposures Regulation) are additional conditions that must be as follows: strictly observed when managing economic risk capital.

Dec. 31, 2009 Dec. 31, 20081 In accordance with the requirements of the MaRisk (Minimum Require Our Responsibility €m €m ments for Risk Management), the risk strategy is consistent with the business strategy and takes into account all significant areas of Credit and counterparty risk 57,738 60,615 business and types of risk. Market risk positions 9,725 9,100 Operational risk 6,538 6,450 The following table shows the allocation of the Postbank Group‘s risk Total capital charge 74,001 76,165 cover amount, broken down by risk types on the basis of the authorized risk capital, for fiscal years 2009 and 2008 before and Tier 1 capital 4,906 4,837 after factoring in correlation effects and the unallocated risk cover thereof: hybrid capital instruments 1,613 1,615 amount (calculated as of December 31 for each year). Tier 2 capital 1,866 3,061

thereof: profit participation Risk capital by risk types Group Management Report certificates outstanding 1,115 1,152 Allocated risk capital thereof: subordinated liabilities 2,233 2,445 Capital and risk components Dec. 31, 2009 Dec. 31, 2008 Tier 3 capital 0 0 €m €m Eligible own funds 6,772 7,898 Market risk 2,781 2,884 Credit risk 2,200 1,191 Tier 1 ratio in % 7,6 7,2 Operational risk 560 635 Capital ratio in % 9,2 10,4 Investment and real estate risk 126 126 Collective risk 1,000 1,000 Postbank’s regulatory risk-bearing capacity is ensured by its compliance Business risk 1,893 1,893 with the regulatory minimum capital requirements. These are determined Consolidated Financial Statements as ratios of available capital and risk positions entered into. The key Total before diversification 8,560 7,729 components of Postbank’s Tier 1 capital are the share capital, recognized Diversification effects 1,456 1,332 reserves, and hybrid capital instruments. Tier 2 capital is composed Total after diversification 7,104 6,397 of profit participation certificates outstanding and long-term subordinated Unallocated risk cover amount 6,340 4,358 liabilities after the deductions prescribed by law. Total risk cover amount 13,444 10,755

The Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin – Federal 57 Financial Supervisory Authority) published an amendment to the Other disclosures relating to capital management can be found in the Other Information Konzernabschlussüberleitungsverordnung (KonÜV – Consolidated Risk Report section of the Group Management Report. 112 Financial Statements Reconciliation Regulation) in the Federal Law 1Prior-period figures restated (see Note 6)

147 Fiscal Year I Consolidated Financial Statements I Notes

(51) Maturity structure As of December 31, 2009:

Payable Less than 3 months 1 to 2 2 to 3 3 to 4 4 to 5 More Total on three to 1 year years years years years than 5 demand months years €m €m €m €m €m €m €m €m €m

Loans and advances to other banks 4,139 5,102 1,145 585 329 655 929 1,583 14,467 Loans and advances to customers 4,356 15,534 7,089 8,337 9,208 8,611 10,062 47,846 111,043 Trading assets 2 4,829 526 718 1,012 1,511 959 10,914 20,471 Hedging derivatives – 161 23 5 8 56 19 248 520 Investment securities 1 2,224 5,149 7,912 9,907 7,326 5,862 33,978 72,359 Current tax assets – – 103 172 1 – 4 – 280 Deferred tax assets – – 161 53 50 36 94 158 552 Other assets 95 88 91 41 35 82 32 281 745

Total 8,593 27,938 14,287 17,823 20,550 18,277 17,961 95,008 220,437

Deposits from other banks 1,757 11,320 15,077 1,147 1,539 1,797 679 6,002 39,318 Due to customers 32,385 61,493 4,204 1,624 2,037 3,091 5,126 22,028 131,988 Debt securities in issue 232 5,159 3,264 785 670 1,847 2,748 2,017 16,722 Trading liabilities 1 5,451 429 688 1,232 2,048 1,306 11,279 22,434 Hedging derivatives 2 344 20 61 116 187 156 1,165 2,051 Provisions 18 89 279 282 245 191 167 877 2,148 Provisions for pensions – 20 37 96 74 73 72 732 1,104 Other provisions 18 69 242 186 171 118 95 145 1,044 Current tax liabilities – – 52 109 0 – 13 – 174 Deferred tax liabilities – – 65 38 16 12 74 100 305 Other liabilities 225 232 205 16 6 4 2 21 711 Subordinated debt 81 29 112 319 262 321 244 4,139 5,507

Total 34,701 84,117 23,707 5,069 6,123 9,498 10,515 47,628 221,358

The remaining maturities of derivatives are presented separately in a 141 table in Note 44.

148 Fiscal Year I Consolidated Financial Statements I Notes

As of December 31, 2008:

Payable Less than 3 months 1 to 2 2 to 3 3 to 4 4 to 5 More Total on three to 1 year years years years years than 5 demand months years €m €m €m €m €m €m €m €m €m For our Shareholders Loans and advances to other banks 3,176 8,236 2,052 597 603 332 1,440 2,248 18,684 An unsere Investoren Loans and advances to customers 3,134 15,247 8,360 6,823 7,415 7,805 9,319 47,215 105,318 Trading assets 2 2,934 426 501 630 681 997 10,402 16,573 Hedging derivatives – 113 60 54 8 9 12 218 474 Investment securities – 6,708 5,696 7,692 9,928 8,618 7,064 37,352 83,058 Current tax assets – – 158 – – – 4 – 162 Deferred tax assets1 4 – – 148 288 1 152 270 863 Other assets 98 118 77 45 37 37 30 228 670 Our Business Divisions

Total 6,414 33,356 16,829 15,860 18,909 17,483 19,018 97,933 225,802 Unsere Geschäftsfelder

Deposits from other banks 3,576 40,837 7,688 810 1,080 1,428 1,629 5,742 62,790 Due to customers 25,263 48,962 10,518 1,298 2,096 3,155 5,127 21,053 117,472 Debt securities in issue – 4,969 4,476 2,252 382 307 1,827 2,129 16,342 Trading liabilities – 5,251 401 467 537 788 1,310 8,233 16,987 Hedging derivatives – 391 32 58 139 162 178 1,733 2,693 Provisions 18 80 261 291 218 183 160 927 2,138

Provisions for pensions – 19 36 92 71 70 69 792 1,149 Our Responsibility Other provisions 18 61 225 199 147 113 91 135 989 Current tax liabilities 4 2 19 72 83 – 12 – 192 Deferred tax liabilities1 5 – 148 57 327 – 348 206 1,091 Other liabilities 235 274 253 17 11 6 8 22 826 Subordinated debt 113 136 61 109 322 266 314 4,415 5,736

Total 29,214 100,902 23,857 5,431 5,195 6,295 10,913 44,460 226,267

(52) Subordinated assets The comfort letters issued in favor of creditors of subsidiaries of Assets are subordinated if their recoverability as receivables ranks behind Deutsche Postbank AG primarily lead to benefits for the subsidiaries Group Management Report other creditors in the event of liquidation or bankruptcy of the issuer. in the form of improved terms and conditions for business and finance. Deutsche Postbank AG profits from these benefits since they Loans and advances to other banks include subordinated assets of have a positive impact on the enterprise value of the subsidiary €21 million (previous year: €21 million). concerned. These benefits are matched by the possibility of the creditors having recourse against Postbank.

(53) Other financial obligations Postbank has issued subordinated comfort letters under the terms In accordance with section 16 of the Postpersonalrechtsgesetz (Deutsche of issue of subordinated bonds issued by Deutsche Postbank Funding Bundespost Former Employees Act), Deutsche Postbank AG pays an LLC I, II, III, and IV, all of which are domiciled in Delaware, U.S.A. annual contribution for civil servant pensions to the relevant pension fund, Bundes-Pensions-Service für Post und Telekommunikation e.V. In accordance with the provisions of that company’s articles of asso- Consolidated Financial Statements (BPS-PT), in the amount of 33 % of the gross compensation of its ciation, the investment in Liquiditäts-Konsortialbank GmbH, Frankfurt active civil servants and of the notional gross compensation of its civil am Main, results in a pro rata additional funding obligation of up servants on leave of absence who are eligible for pensions. Postbank to €5.4 million. Deutsche Postbank AG is also liable pro rata for the has no further obligations for benefits paid by the pension fund. fulfillment of the additional funding obligations of other shareholders belonging to the Bundesverband deutscher Banken e.V. (Association Postbank ensures that, with the exception of political risk, its Deutsche of German Banks). Postbank International S.A. (Luxembourg), PB Capital Corp. (Delaware, U.S.A.), PB Factoring GmbH, (Bonn), and BHW Bausparkasse AG, Other Information (Hamelin) subsidiaries will be able to meet their obligations. 112 1Prior-period figures restated (see Note 6)

149 Fiscal Year I Consolidated Financial Statements I Notes

There are also additional funding obligations in respect of the (55) Employees deposit protection fund of the Bundesverband deutscher Banken e.V. The average number of employees in the Group in the period under in the amount laid down in its statutes, as well as in respect of review was as follows: the Entschädigungseinrichtung deutscher Banken – the mandatory compensation scheme for all deposit-taking institutions in Germany – Total Total on the basis of the provisions of the Einlagensicherungs- und 2009 2008 Anlegerentschädigungsgesetz (German Deposit Protection and Investor Compensation Act). Full-time Civil servants 6,192 6,460 In addition, Deutsche Postbank International S.A., Luxembourg, Salaried employees 11,235 11,419 is a member of the “Association pour la Garantie des Dépôts Luxembourg” (AGDL), the Luxembourg deposit guaranty and investor 17,427 17,879 indemnity fund.

Part-time Financial obligations under Postbank AG’s operating leases involving Civil servants 915 940 non-cancelable leasing agreements relate to land and buildings and Salaried employees 2,592 2,603 have the following maturity structures:

3,507 3,543 Dec. 31, 2009 Dec. 31, 2008 €m €m 20,934 21,422

in the first year after the balance sheet date 26 21 The employees are employed almost exclusively in Germany. in the second year after the balance sheet date 21 17 in the third year after the balance sheet date 19 16 in the fourth year after the balance sheet date 16 14 (56) Related party disclosures in the fifth year after the balance sheet date 16 12 In addition to the companies included in the consolidated financial more than five years after the balance sheet date 50 59 statements, Postbank has direct or indirect relationships with Deutsche Bank AG and Deutsche Post AG, which have exercised a Total 148 139 significant influence on Postbank since March 1, 2009, and a small number of unconsolidated Postbank AG subsidiaries and other Furthermore, Postbank Filialvertrieb AG has annual obligations from investees in the course of its ordinary business activities. Other rent and service charges of €87 million (previous year: €85 million). related parties are Deutsche Post AG subsidiaries and other investees (until February 28, 2009). Related parties are defined as the members of the Management Board and the Supervisory Board of Deutsche (54) Trust activities Postbank AG and the close members of their families. In the course of Trust activities are composed of the following items: ordinary business activities, all transactions for the provision of goods and services entered into with the aforementioned companies were Dec. 31, 2009 Dec. 31, 2008 conducted at standard market terms and conditions. €m €m Business relationships with other related parties Trust assets All related parties that are controlled by Deutsche Postbank AG or on Loans and advances to other banks 71 61 which the Group has a significant influence are presented in the list of Loans and advances to customers 974 1.024 shareholdings, which includes disclosures on the interest held, equity, and profit or loss for the year by business area. The list of shareholdings 1,045 1,085 can be found in the commercial register of the Bonn Local Court.

Trust liabilities Related party transactions also include Deutsche Postbank AG’s Trust funds for transmitted loans 489 513 membership of a defined contribution pension plan, the expenses for Special fund of the State of which relate mainly to payments made to Bundes-Pensions-Service Mecklenburg-Western Pomerania 46 45 für Post und Telekommunikation e.V. in the amount of €115 million Retired farmers‘ pension fund 12 12 (previous year: €115 million). Other disclosures relating to Bundes- Special-purpose funds 498 515 Pensions-Service für Post und Telekommunikation e.V. can be found 110 in Note 4 (o), Provisions. 1,045 1,085 The transactions with Deutsche Post AG as the parent and relationships with its subsidiaries as other related parties are presented up to February 28, 2009.

150 Fiscal Year I Consolidated Financial Statements I Notes

The income and expenses relating to Deutsche Bank AG and Deutsche The investment securities relate to bonds issued by Deutsche Bank AG. Post AG incurred after February 28, 2009 are reported as attributable to companies with a significant influence over Deutsche Postbank AG. Dec. 31, 2009 Dec. 31, 2008 €m €m Related party receivables Other assets Dec. 31, 2009 Dec. 31, 2008 Deutsche Post AG – 35

€m €m Companies with a significant influence 9 – For our Shareholders An unsere Investoren Subsidiaries 1 1 Loans and advances to other banks Other related parties – 2 Companies with a significant influence 609 – 10 38 609 – €7 million of the other assets attributable to companies with a Loans and advances to customers significant influence relates to Deutsche Post AG. Deutsche Post AG – 130 Companies with a significant influence 78 – Related party payables

Subsidiaries 10 12 Our Business Divisions Unsere Geschäftsfelder Dec. 31, 2009 Dec. 31, 2008 88 142 €m €m

Loans and advances to other banks with a significant influence relate Deposits from other banks in full to loans and advances to Deutsche Bank AG and primarily Companies with a significant influence 2 – comprise receivables from money market transactions. 2 – Loans and advances to companies with a significant influence over Due to customers

Deutsche Postbank AG relate primarily to loans and overdrafts Our Responsibility Deutsche Post AG – 37 extended to Deutsche Post AG. Companies with a significant influence 11 – Loans and advances to subsidiaries primarily relate to Deutsche Subsidiaries 67 56 Postbank AG‘s receivables from CREDA Objektanlage- und -verwaltungs Other related parties – 44 gesellschaft mbH and from RALOS Verwaltungs GmbH & Co. 78 137 Vermietungs-KG. Trading liabilities Dec. 31, 2009 Dec. 31, 2008 Companies with a significant influence 3,040 – €m €m 3,040 –

Trading assets Group Management Report Hedging derivatives Companies with a significant influence 2,555 – Companies with a significant influence 31 –

2,555 – 31 –

Hedging derivatives Other liabilities Companies with a significant influence 25 – Deutsche Post AG – 80 Companies with a significant influence 53 – 25 – Subsidiaries 3 2 Other related parties – 8

Transactions involving trading assets and hedging derivatives relate Consolidated Financial Statements solely to Deutsche Bank AG. 56 90

Subordinated debt Dec. 31, 2009 Dec. 31, 2008 €m €m Subsidiaries 100 101

100 101 Investment securities Companies with a significant influence 181 – The deposits from other banks, trading liabilities, and hedging derivatives due to other banks with a significant influence relate in Other Information 181 – full to Deutsche Bank AG.

151 Fiscal Year I Consolidated Financial Statements I Notes

The amounts due to companies with a significant influence relate in Income and expenses from related parties full to Deutsche Post AG. 2009 2008 Amounts due to subsidiaries relate primarily to a term deposit by €m €m Postbank P.O.S. Transact GmbH at Deutsche Postbank International Interest income S.A. and the provision of services between Deutsche Postbank International S.A. and BHW Invest S.A.R.L. Deutsche Post AG 3 35 Companies with a significant influence 80 – €53 million of the other liabilities due to companies with a significant Subsidiaries 9 12 influence relates to Deutsche Post AG; this concerns in particular liabil ities Other related parties – 3 from the retail outlet business as stipulated in the cooperation 92 50 agreement. Interest expense The subordinated debt item contains subordinated liabilities of BHW Deutsche Post AG 1 – Bausparkasse AG and Deutsche Postbank AG to BHW Euro Finance B.V. Companies with a significant influence 116 – in the form of subordinated promissory note loans. Subsidiaries 5 9 Other related parties – 1 As of the end of the reporting period, contingent liabilities from guarantees and warranty obligations to Deutsche Post AG amounted 122 10 to €3 million (December 31, 2008: €7 million). There are no Fee and commission income contingent liabilities from other obligations, i.e., from irrevocable loan Deutsche Post AG 76 479 commitments or similar obligations to subsidiaries and associates. Companies with a significant influence 44 – Subsidiaries 3 2

123 481

Fee and commission expense Subsidiaries 10 11

10 11

Net trading income Companies with a significant influence – 143 –

– 143 –

Net income from investment securities Companies with a significant influence 3 – Subsidiaries 4 –

7 –

Administrative expenses Deutsche Post AG 45 315 Companies with a significant influence 179 – Subsidiaries 19 26 Other related parties 26 164

269 505

Other income Deutsche Post AG – 4 Subsidiaries 8 6 Other related parties 3 27

11 37

Other expenses Deutsche Post AG – 1 Companies with a significant influence 3 –

3 1

152 Fiscal Year I Consolidated Financial Statements I Notes

€75 million of the interest income from companies with a significant The base pay (fixed component) and other compensation are not influence relates to Deutsche Bank AG and €5 million to Deutsche linked to performance. The base pay is paid as a monthly salary in Post AG. twelve equal installments.

The interest expense to companies with a significant influence relates The standard performance-related (variable) component consists of entirely to Deutsche Bank AG. the annual bonus.

The fee and commission income from companies with a significant The annual bonuses awarded to the members of the Management For our Shareholders influence in the amount of €44 million mainly relates to income Board are paid according to the achievement of quantitative and/ An unsere Investoren from Deutsche Post AG for the postal services provided in Deutsche or qualitative targets. These targets form part of a target agreement Postbank AG’s branches. established at the start of each fiscal year. The size of the annual bonuses is based on the degree to which predetermined target values The net trading income relates in full to Deutsche Bank AG. are reached or exceeded.

The administrative expenses attributable to companies with a signifi- The size of the annual bonus is capped on the basis of individual cant influence relate in particular to payments to Deutsche Post AG agreements. The maximum annual bonus is granted where the upper for the financial services provided in its retail outlets and for postage target value specified for the fiscal year is reached. The variable remu- expenses. neration component can exceed the fixed remuneration component. Our Business Divisions Unsere Geschäftsfelder

Administrative expenses attributable to other related parties relate in The Supervisory Board has the right to award members of the particular to rental expenses and service charges. Management Board an appropriate special bonus for exceptional performance. Lease expenses from rentals from other related parties amounted to €11 million (previous year: €64 million), lease income from rentals Level of remuneration of the Management Board to other related parties amounted to €2 million (previous year: €11 in fiscal year 2009 million), and income from rentals to unconsolidated subsidiaries of The nine active members of the Management Board received fixed Deutsche Postbank AG amounted to €2 million (previous year: €2 remuneration totaling €4,159.8 thousand (previous year: €4,309.3 Our Responsibility Our Responsibility million). thousand) in fiscal year 2009. The fixed component includes “other compensation” totaling €196.2 thousand (previous year: €175.3 There were no acquisitions or sales of land, buildings, or other assets thousand). This additional remuneration relates primarily to the use of from/to related parties. management cars, the reimbursement of travel costs, and contri butions to insurance schemes. In principle, other compensation is There are no transfers to related parties under license agreements available to all members of the Management Board equally; the and no provisions for doubtful receivables relating to related parties amount varies depending on different personal circumstances. were recognized. No annual bonus will be paid for fiscal year 2009.

Remuneration of the Management Board The nine active members of the Management Board received remuneration totaling €4,159.8 thousand (previous year €16,174.3 Group Management Report Structure of remuneration of the Management Board thousand) in fiscal year 2009. in fiscal year 2009 The overall structure of the remuneration of the Management Board The remuneration disclosed covers all activities performed by members as well as significant contract components are stipulated by the of the Management Board within the Postbank Group. Supervisory Board of Deutsche Postbank AG, and regularly reviewed. Deutsche Postbank AG has neither launched a stock option program, The Executive Committee of the Supervisory Board discusses the nor does it currently intend to do so. appropriateness of the remuneration of the members of the Manage ment Board of Deutsche Postbank AG, taking into account the The Supervisory Board of Deutsche Postbank AG and the Chairman Company‘s performance, the sector, and the prospects for the future. of the Management Board Wolfgang Klein, who stepped down as

of June 30, 2009, decided under amicable conditions and by mutual Consolidated Financial Statements The level of remuneration for members of the Management Board is agreement on the termination of the Management Board contract, determined on the basis of the size and activity of the Company, its a decision that was below the recommendations of the German economic and financial situation, and the tasks of the board members Corporate Governance Code. The contractual relationship with in question. Remuneration is calculated so that it is appropriate and Wolfgang Klein will be terminated prematurely on June 30, 2010. competitive in the national and international job market and therefore He received a fixed severance payment of € 2,937.5 thousand. offers an incentive for dedicated and successful work. The level of Wolfgang Klein declined all entitlements to an annual bonus for remuneration is linked to performance. fiscal year 2009. Other Information

Overall remuneration consists of fixed components and a performance- related component.

153 Fiscal Year I Consolidated Financial Statements I Notes

Dirk Berensmann stepped down as the member of the Management Management Board remuneration in 2008 Board responsible for the IT/Operations board department as of May 29, 2009. The Management Board contract with Dirk Berensmann would Fixed Performance- Total have regularly ended on December 31, 2009. Dirk Berensmann remuneration related received neither a severance payment nor an annual bonus for fiscal component component year 2009. Fixed Other Annual Special- compo- compen- bonus bonus1 Management Board remuneration in 2009 nent sation € thousand € thousand € thousand € thousand € thousand

Fixed Performance- Total remuneration related Wolfgang Klein 875.0 28.4 0 2,400.0 3,303.4 component component Dirk Berensmann 500.0 24.6 0 1,300.0 1,824.6

Fixed Other Mario Daberkow component compen- (until November 30, sation 2008) 241.7 15.2 0 900.0 1,156.9 € thousand € thousand € thousand € thousand Stefan Jütte 538.1 14.7 0 1,465.0 2,017.8 Horst Küpker (since July 1, Stefan Jütte 2008) 250.0 11.2 0 1,300.0 1,561.2 (Chairman since Guido Lohmann July 1, 2009) 700.6 14.9 0 715.5 (until November 30, Dirk Berensmann 2008) 229.2 19.1 0 900.0 1,148.3 (until May 29, 2009) 208.3 10.2 0 218.5 Michael Meyer 350.0 16.8 0 1,300.0 1,666.8 Mario Daberkow Loukas Rizos (since May 30, 2009) 292.2 17.0 0 309.2 (until June 30, Marc Hess 500.0 35.3 0 535.3 2008) 300.0 9.9 0 100.0 409.9 Wolfgang Klein Hans-Peter Schmid 400.0 18.5 0 900.0 1,318.5 (Chairman until Ralf Stemmer 450.0 16.9 0 1,300.0 1,766.9 June 30, 2009) 437.5 13.0 0 450.5 Horst Küpker 500.0 32.8 0 532.8 Michael Meyer 425.0 20.4 0 445.4 Total 4,134.0 175.3 0 11,865.0 16,174.3

Hans-Peter Schmid 400.0 26.1 0 426.1 1 Includes payment of a one-time premium (special bonus) to members of the Management Ralf Stemmer 500.0 26.5 0 526.5 Board in connection with the acquisition of an investment in the Company in the amount of €11,515.0 thousand. Performance-related remuneration for fiscal year 2007 in the amount of €350.0 thousand is also included. Not including these payments, overall remuneration Total 3,963.6 196.2 0 4,159.8 for the ten board members active in fiscal year 2008 amounted to €4,309.3 thousand (previous year: €10,529.0 thousand). An annual bonus (corporate and personal performance bonus) was not paid for fiscal year 2008.

New structure of the remuneration of the Management Board In fiscal year 2009, the Supervisory Board intensively reviewed the remuneration system for the Management Board of Deutsche Postbank AG and approved adjustments to the remuneration system to meet new statutory and regulatory requirements. In the future, remuneration of the Management Board will be more strongly oriented to sustainable corporate development.

Overall remuneration will continue to consist of fixed and performance- related components.

The base pay (fixed component) and other compensation are not linked to performance. Base pay is paid as a monthly salary in twelve equal installments. The additional remuneration relates primarily to the use of management cars, the reimbursement of travel costs, and contributions to insurance schemes. In principle, other compensation is available to all members of the Management Board equally; the amount varies depending on different personal circumstances.

The annual bonus is linked to performance.

The annual bonuses awarded to the members of the Management Board are based on the achievement of quantitative and/or

154 Fiscal Year I Consolidated Financial Statements I Notes

qualitative targets. These targets form part of a target agreement service of board member Mario Daberkow shall be measured from the established at the start of each fiscal year (base year). The size of the first conclusion of a Management Board employment contract effective bonuses is based on the degree to which predetermined target values as of November 1, 2005. are reached or exceeded. The size of the bonus continues to be capped on the basis of individual agreements. Future pension payments will be adjusted in line with the percentage growth in the highest pay group of the collective agreement for the In the future, the annual bonus will no longer be paid out in full on an Verband öffentlicher Banken (Association of German Public Sector Banks). annual basis, even when the targets agreed on have been reached. Otherwise, payments are adjusted in line with Germany‘s consumer For our Shareholders price index. An unsere Investoren Instead, 60 % of the annual bonus calculated on the basis of target attainment will be subject to the proviso of sustainable Group perfor In May 2007, the Executive Committee of Deutsche Postbank AG‘s mance. Sustainability of the Group’s performance will be determined Supervisory Board resolved to restructure the pension arrangements three fiscal years after the base year (sustainability phase). The for members of the Management Board appointed after March 31, long-term component will not be paid out until after the sustainability 2007, from the previous final salary-based pension system to a phase has ended and only if the relevant sustainability criterion to be defined contribution plan. The pension commitments of the members established by the Supervisory Board has been met. If the sustainability of the Management Board appointed after that date, Marc Hess, criterion is positive or equal to or better than in the base year during Michael Meyer, and Horst Küpker, are therefore based on the following the sustainability phase, then the long-term component will be basic system: A benefit contribution is granted for each eligible year Our Business Divisions paid in the fourth year after the base year. Otherwise, the payment is of service. This benefit contribution is credited to a virtual pension Unsere Geschäftsfelder forfeited without compensation. Remuneration of the Management account that bears interest annually at the relevant interest rate used Board is thus affected by negative developments in the Company in the assessment for tax purposes of direct pension commitments during the entire measurement period (malus system). from the time of the grant until the insured event. When the insured event occurs, the amount of the pension is determined by distributing Pension commitments the pension assets accumulated in the pension account across the The members of the Management Board benefit from individually expected benefit period of the pension in accordance with actuarial agreed direct pension commitments. Because each board member has principles. There is no waiting period and entitlements from pension a different career history, the precise arrangements differ. commitments are vested immediately. Pensions have a 1 % p.a. Our Responsibility Our Responsibility adjustment rate. A pension shall be paid if the member of the Management Board leaves our service as a result of disability, death or old age. As a rule, Members of the Management Board Michael Meyer, Marc Hess, old-age pensions are paid from the age of 62. and Horst Küpker have the right to choose between regular pension payments and a lump-sum capital payment. Under the standard pension commitments valid until February 28, 2007, pension rights generally accrue after at least five years of service. Pension commitments for individual members of the In the case of disability, this minimum waiting period may be waived Management Board in part.

Pension commitments The size of the pension depends on the length of service and the Percentage Maximum Service cost Group Management Report amount of pensionable remuneration. Only the fixed component of of final percentage for pension remuneration (base pay) is pensionable. The basic rule is that pension salary as of of final salary obligations benefits of 50 % relating to the percentage of final salary accrue Dec. 31, 2009 to members of the Management Board after five years of service. % % € Benefits accrue at a constant rate of 2 % for each eligible year of service. The maximum level of pension benefits (60 %) relating to the Stefan Jütte 25.50 50.00 0 percentage of final salary is generally reached after ten years of service. Hans-Peter Schmid 0 60.00 222,646 The arrangements in the case of Chairman of the Management Ralf Stemmer 50 60.00 70,392 Board Stefan Jütte are different, however. The pension benefits for Mario Daberkow 0 60.00 93,165 Stefan Jütte amount to a maximum of 50 % of pensionable income.

The pension commitments further include rules for the payment of a Mario Daberkow and Hans-Peter Schmid have not yet completed Consolidated Financial Statements transitional allowance for board members who leave the Company their respective waiting periods. As of the end of fiscal year 2009, upon reaching the age limit or for reasons of disability. The benefit they therefore have no entitlement to an old-age pension under period is two years. these arrangements.

Should the Management Board contract be terminated by Postbank prior to the expiration of the regular contractual term in the cases of Mario Daberkow, Hans-Peter Schmid and Ralf Stemmer, the pension shall be calculated as if the Management Board contract had been Other Information fulfilled until its regular expiration. This shall not apply if Postbank terminates the employment relationship for good cause. The length of

155 Fiscal Year I Consolidated Financial Statements I Notes

Contribution Pension Service cost The amount of the Supervisory Board’s remuneration is capped in amount account for pension several aspects: Neither of the two variable components may exceed for 2009 balance as of obligations the value of the fixed annual remuneration. Furthermore, the Dec. 31, 2009 short-term variable component may not exceed in total 0.5 % of the € € € Company’s net retained profit, less 4 % of the contributions made on the lowest issue price of the shares. In addition, remuneration for Horst Küpker 125,000 334,043 97,303 committee membership may not exceed twice the remuneration of Michael Meyer 87,500 456,335 71,825 the Supervisory Board member concerned. Marc Hess 125,000 290,006 100,953 Supervisory Board members receive the remuneration after the The remuneration paid to former members of the Management Board Annual General Meeting. and their dependants amounted to €4.68 million (previous year: €16.42 million). Persons who are members of the Supervisory Board for only part of a fiscal year receive the corresponding remuneration ratably. The defined benefit obligation (DBO) for current pensions, calculated in line with international accounting principles, totals €55.42 million. The total remuneration paid to members of the Supervisory Board for fiscal year 2009 amounted to €536.3 thousand (previous year: Remuneration of the Supervisory Board €526.2 thousand). As concerns earnings-related remuneration, the Deutsche Postbank AG’s Annual General Meeting last changed the Supervisory Board only received the fixed remuneration. remuneration of the Supervisory Board in 2004, adjusting it in line with the Corporate Governance Code. The remuneration system is laid down in Article 15 of the Articles of Association of Deutsche Postbank AG. In accordance with this article, the annual remuneration of members of the Supervisory Board consists of fixed and perfor mance-related components, plus a performance-related component with a long-term incentive effect. This reflects the responsibilities and scope of activity of the Supervisory Board’s work and the economic performance of Deutsche Postbank AG. The positions of chair and deputy chair as well as membership of committees are reflected in the remuneration.

The remuneration of a full member of the Supervisory Board who is not a member of a committee is as follows: The fixed component amounts to €15,000, while the variable annual component amounts to €300 for each €0.03 by which the consolidated net profit per share for the respective fiscal year exceeds the amount of €2.00. Members of the Supervisory Board will be entitled to performance-related remuneration with a long-term incentive effect amounting to €300 for each 1 % by which the consolidated net profit per share for the second fiscal year following the fiscal year under review exceeds the consolidated net profit per share of the fiscal year preceding the fiscal year under review.

The Chairman of the Supervisory Board receives double the remuneration of a full member of the Supervisory Board, while the Deputy Chairman receives one and a half times the remuneration. The chairmanship of a Supervisory Board committee is remunerated by an additional sum in the amount of the remuneration, while members of the Supervisory Board committees additionally receive half this amount for each such position held. This does not apply to membership of the Mediation Committee and the Nomination Committee.

156 Fiscal Year I Consolidated Financial Statements I Notes

The total remuneration paid to the individual members of the Super visory Board was as follows:

Members of the Supervisory Board Remuneration for fiscal year 2009 Remuneration for fiscal year 2008

Fixed Variable Attendance Fixed Variable Attendance remuneration remuneration1 allowances Total remuneration remuneration1 allowances Total € thousand € thousand € thousand € thousand € thousand € thousand € thousand € thousand

Frank Appel 52.5 – 2.8 55.3 45.5 – 2.5 48.0 For our Shareholders An unsere Investoren Michael Sommer 45.0 – 1.8 46.8 45.0 – 1.8 46.8 John Allan 10.0 – 0.3 10.3 9.8 – 0.5 10.3 Wilfried Anhäuser 22.5 – 2.5 25.0 22.5 – 2.5 25.0 Jörg Asmussen – – – – 6.1 – 0.3 6.4 Marietta Auer 22.5 – 2.0 24.5 22.5 – 2.5 25.0 Rolf Bauermeister 15.0 – 1.0 16.0 15.0 – 1.3 16.3 Wilfried Boysen 15.0 – 1.0 16.0 15.0 – 1.3 16.3 Henry Cordes 15.0 – 0.8 15.8 1.8 – 0.3 2.1 Edgar Ernst 30.0 – 3.8 33.8 30.0 – 3.5 33.5 Annette Harms 15.0 – 1.0 16.0 15.0 – 1.3 16.3 Tessen von Heydebreck 14.9 – 2.0 16.9 – – – –

Peter Hoch 32.3 – 3.0 35.3 37.5 – 3.5 41.0 Our Business Divisions Unsere Geschäftsfelder Elmar Kallfelz 27.0 – 2.5 29.5 25.1 – 3.0 28.1 Ralf Krüger 28.6 – 2.5 31.1 37.5 – 3.5 41.0 Axel Nawrath – – – – 4.9 – – 4.9 Hans-Dieter Petram 22.5 – 1.3 23.8 19.9 – 1.3 21.2 Bernd Pfaffenbach 4.6 – 0.0 4.6 15.0 – 1.3 16.3 Lawrence A. Rosen 4.6 – 0.5 5.1 – – – – Klaus Schlede – – – – 7.9 – 0.8 8.7 Elmo von Schorlemer 4.6 – 0.3 4.9 15.0 – 1.3 16.3 Torsten Schulte 26.8 – 2.3 29.1 27.4 – 2.0 29.4 Eric Stadler 16.6 – 1.5 18.1 15.0 – 1.3 16.3 Werner Steinmüller 24.5 – 2.8 27.3 0.0 – – – Our Responsibility Gerd Tausendfreund 22.5 – 3.0 25.5 22.5 – 2.5 25.0 Renate Treis 24.1 – 1.5 25.6 22.5 – 2.5 25.0 Klaus Zumwinkel – – – – 7.0 – – 7.0

Total 496.1 – 40.2 536.3 485.4 – 40.8 526.2

1 The reported variable remuneration includes the short- and long-term remuneration to be paid to the Supervisory Board members for the relevant fiscal year.

Peter Hoch received remuneration of €24 thousand for his work on D&O insurance the Supervisory Board of the BHW Group. The members of the Management Board and of the Supervisory Board are covered by D&O insurance in line with international standards. Group Management Report No further payments or benefits were granted to members of the In accordance with the requirements of the Corporate Governance Code, Supervisory Board in return for services provided individually in addi- the individual Management Board and Supervisory Board members tion to members’ Supervisory Board activities, especially consulting are required to pay a deductible if a claim is brought. The deductible and arrangement services. This does not apply to the remuneration of amounts were changed in line with the requirements of section 93 employee representatives as set out in their respective employment AktG and section 3.8 of the German Corporate Governance Code contracts. effective January 1, 2010.

Shareholdings of the members of the Management Board and Supervisory Board (57) Other disclosures In fiscal year 2009, the aggregate shareholdings of all members of the Deutsche Postbank AG’s consolidated financial statements are in-

Management Board and Supervisory Board amounted to less than cluded in the consolidated financial statements of Deutsche Post AG. Consolidated Financial Statements 1 % of the shares issued by the Company. In accordance with section 2 (4) of the Postumwandlungsgesetz As of the balance sheet date, loans of €950.4 thousand (previous (PostUmwG – Postal Service Transformation Act), the German year: €70.4 thousand) had been granted to members of the Manage- government guarantees settlement of all liabilities existing at the ment Board and members of the Supervisory Board. In fiscal year time of Deutsche Postbank AG’s registration in the commercial 2009, no loans were granted to members of the Management Board register. The government guarantee for savings deposits expired five who left the Company in the course of the year. No other contingent years after the date of registration in the commercial register. liabilities were entered into. Other Information

157 Fiscal Year I Consolidated Financial Statements I Notes

Deutsche Postbank AG is a member of the deposit protection fund of (58) Members of executive bodies the Bundesverband deutscher Banken e.V. and the Entschädigungs Management Board einrichtung deutscher Banken GmbH investor compensation scheme. The members of the Management Board of Deutsche Postbank AG are: Deutsche Postbank AG has issued guarantee bonds in the amount of $517.6 million for its subsidiary PB Capital Corp., Delaware, U.S.A. Stefan Jütte, Bonn These include a guarantee bond for the commercial paper program (Chairman since July 1, 2009) ($307.2 million), a guarantee bond for swaps ($204.7 million), and a Wolfgang Klein, Bonn rental guarantee for business premises in New York ($5.7 million). (Chairman) until June 30, 2009 Dirk Berensmann, Unkel until May 29, 2009 Mario Daberkow, Bonn since May 30, 2009 Marc Hess, Bonn since January 1, 2009 Horst Küpker, Bad Honnef Michael Meyer, Bonn Hans-Peter Schmid, Baldham Ralf Stemmer, Königswinter

Offices held by members of the Management Board of Deutsche Postbank AG as of December 31, 2009 on supervisory boards or other supervisory bodies:

Stefan Jütte Chairman since July 1, 2009

Function Company Chairman of the Supervisory Board Postbank Filialvertrieb AG, Bonn (since August 3, 2009) Member of the Supervisory Board (since July 14, 2009) Chairman of the Supervisory Board PB Firmenkunden AG, Bonn Chairman of the Board of Directors PB Capital Corp., Wilmington (since July 1, 2009) (Delaware, U.S.A.) Member of the Board of Directors (until June 30, 2009) Chairman of the Board of Directors PB (USA) Holdings, Inc., Wilmington (since July 1, 2009) (Delaware, U.S.A.) Member of the Board of Directors (until June 30, 2009) Member of the Supervisory Board BVVG Bodenverwertungs- und verwal- tungsgesellschaft mbH, Berlin Member of the Supervisory Board IVG Institutional Funds GmbH, Wiesbaden Member of the Management Board Bundesverband deutscher Banken (since July 1, 2009) e.V., Berlin Member of the Advisory Board CORPUS SIREO Holding GmbH & Co. KG, Cologne

Offices relinquished during the year Chairman of the Supervisory Board Postbank Leasing GmbH, Bonn (until September 30, 2009) Chairman of the Supervisory Board PB Factoring GmbH, Bonn (until September 30, 2009) Member of the Board of Directors Deutsche Postbank International S.A., (until August 20, 2009) Luxembourg Member of the Supervisory Board Betriebs-Center für Banken AG, (until November 30, 2009) Frankfurt am Main

158 Fiscal Year I Consolidated Financial Statements I Notes

Wolfgang Klein Chaiman Mario Daberkow Member of the Management Board until June 30, 2009 since May 30, 2009

Function Company Function Company Chairman of the Supervisory Board Comma Soft AG, Bonn Member and Chairman Betriebs-Center für Banken AG, of the Supervisory Board Frankfurt am Main (since December 1, 2009) Offices relinquished during the year Member and Chairman of the Postbank Systems AG, Bonn For our Shareholders

Chairman of the Supervisory Board Betriebs-Center für Banken AG, Supervisory Board An unsere Investoren (until June 30, 2009) Frankfurt am Main (since May 30, 2009) Chairman of the Supervisory Board Postbank Filialvertrieb AG, Bonn Member and Chairman of the Postbank Support GmbH, Cologne (until June 30, 2009) Advisory Board (since May 30, 2009) Chairman of the Supervisory Board Postbank Finanzberatung AG, (until January 31, 2009) Hamelin Deputy Chairman of the Deutsche WertpapierService Bank AG, Advisory Board Frankfurt am Main Chairman of the Board of Directors PB Capital Corp., Wilmington (since November 12, 2009) (until June 30, 2009) (Delaware, U.S.A.) Member of the Advisory Board Chairman of the Board of Directors PB (USA) Holdings, Inc., Wilmington (since August 4, 2009) (until June 30, 2009) (Delaware, U.S.A.) Deputy Chairman of the VÖB-ZVD Bank für Zahlungsverkehrs- Deputy Chairman of the Deutsche Postbank Financial Services Advisory Board dienstleistungen GmbH, Bonn Our Business Divisions Supervisory Board GmbH, Frankfurt am Main Unsere Geschäftsfelder Deputy Chairman of the Eurogiro A/S, Taastrup (Denmark) (until June 30, 2009) Board of Directors Deputy Chairman of the PB Spezial-Investmentaktiengesell- (since July 3, 2009) Supervisory Board schaft mit Teilgesellschaftsvermögen, Member of the Board of Directors (until June 30, 2009) Frankfurt am Main (since June 29, 2009) Member of the Management Board Bundesverband deutscher Banken e.V., Member of the Supervisory Board BHW Bausparkasse AG, Hamelin (until June 30, 2009) Berlin Member of the Supervisory Board BHW Holding AG, Berlin/Hamelin Member of the Advisory Board Verband der Sparda-Banken e.V., (until June 30, 2009) Frankfurt am Main Member of the Advisory Board Proactiv Holding AG, Hilden Offices relinquished during the year Our Responsibility Our Responsibility (until June 30, 2009) Chairman of the Advisory Board CREDA Objektanlage- und -verwal- (until April 2, 2009) tungsgesellschaft mbH, Bonn Member of the Board of Directors Eurogiro NCIP A/S, Taastrup Dirk Berensmann Member of the Management Board (until July 1, 2009) (Denmark) until May 29, 2009

Function Company Marc Hess Member of the Management Board since January 1, 2009

Offices relinquished during the year Function Company Chairman of the Supervisory Board Postbank Systems AG, Bonn (until May 29, 2009) Member of the Supervisory Board BHW Bausparkasse AG, Hamelin (since July 3, 2009) Group Management Report Chairman of the Advisory Board Postbank Support GmbH, Cologne (until May 29, 2009) Member of the Supervisory Board BHW Holding AG, Berlin/Hamelin Chairman of the Advisory Board CREDA Objektanlage- und verwal- Member of the Supervisory Board Deutsche Postbank Financial Services (from April 3, 2009 until May 29, tungsgesellschaft mbH, Bonn GmbH, Frankfurt am Main 2009) Member of the Supervisory Board PB Spezial-Investmentaktiengesell- Chairman of the Board of Directors Eurogiro Holding A/S, Taastrup schaft mit Teilgesellschaftsvermögen, (until May 8, 2009) (Denmark) Frankfurt am Main Member of the Board of Directors (from May 9, 2009 to May 29, 2009) Member of the Supervisory Board Betriebs-Center für Banken AG, (until May 29, 2009) Frankfurt am Main

Member of the Supervisory Board BHW Bausparkasse AG, Hamelin Consolidated Financial Statements (until May 29, 2009) Member of the Supervisory Board BHW Holding AG, Berlin/Hamelin (until May 29, 2009) Member of the Supervisory Board Postbank Filialvertrieb AG, Bonn (until May 29, 2009) Member of the Supervisory Board Postbank Finanzberatung AG, (until May 29, 2009) Hamelin

Member of the Management Board e-Finance Lab Frankfurt am Main, Other Information (until May 29, 2009) Frankfurt University

159 Fiscal Year I Consolidated Financial Statements I Notes

Horst Küpker Member of the Advisory Board Proactiv Holding AG, Hilden (since March 3, 2009) Function Company Member of the Economic Advisory Board HUK-Coburg Versicherungsgruppe, Chairman of the Supervisory Board Deutsche Postbank Financial Services (since July 1, 2009) Coburg GmbH, Frankfurt am Main Chairman of the Supervisory Board PB Spezial-Investmentaktiengesell- schaft mit Teilgesellschaftsvermögen, Frankfurt am Main Hans-Peter Schmid Chairman of the Deutsche Postbank International S.A., Board of Directors Luxembourg Function Company Chairman of the Deutsche Postbank Vermögens- Member of the Supervisory Board Postbank Finanzberatung AG, Board of Directors Management S.A., Luxembourg (since February 1, 2009) Hamelin Deputy Chairman of the PB Firmenkunden AG, Bonn Member of the Supervisory Board Postbank Vertriebsakademie GmbH, Supervisory Board Hamelin Deputy Chairman of the Postbank Finanzberatung AG, Member of the Supervisory Board Bayerische Börse AG, Munich Supervisory Board Hamelin Member of the Management Board Bankenvereinigung Nordrhein- (since November 6, 2009) (since November 4, 2009) Westfalen e.V., Düsseldorf Member of the Supervisory Board (until November 5, 2009)

Ralf Stemmer Offices relinquished during the year Chairman of the Supervisory Board Deutsche Postbank Privat Investment Function Company (until July 31, 2009) Kapitalanlagegesellschaft mbH, Bonn Chairman of the Supervisory Board Postbank Immobilien und Bau- management GmbH, Bonn Chairman of the Supervisory Board Postbank Vertriebsakademie GmbH, Michael Meyer Hamelin Deputy Chairman of the Postbank Direkt GmbH, Bonn* Function Company Supervisory Board Chairman of the Supervisory Board BHW Bausparkasse AG, Hamelin (since September 2, 2009) (since January 1, 2009) Member of the Supervisory Board (since July 1, 2009) Chairman of the Supervisory Board BHW Holding AG, Berlin/Hamelin (since January 1, 2009) Deputy Chairman of the Postbank Systems AG, Bonn Supervisory Board Chairman of the Supervisory Board Postbank Direkt GmbH, Bonn* (since September 2, 2009) Deputy Chairman of the Postbank Support GmbH, Cologne Member of the Supervisory Board Advisory Board (since July 1, 2009) Member of the Supervisory Board Betriebs-Center für Banken AG, Chairman of the Supervisory Board Postbank Finanzberatung AG, Frankfurt am Main (since February 1, 2009) Hamelin Member of the Supervisory Board BHW Bausparkasse AG, Hamelin Member of the Supervisory Board Member of the Supervisory Board BHW Holding AG, Berlin/Hamelin (until January 31, 2009) Member of the Supervisory Board PB Firmenkunden AG, Bonn Chairman of the Advisory Board VÖB-ZVD Bank für Zahlungsverkehrs- Member of the Supervisory Board PB Pensionsfonds AG, Hilden dienstleistungen GmbH, Bonn Member of the Supervisory Board Postbank Filialvertrieb AG, Bonn Member and Deputy Chairman Deutsche Postbank Financial Services of the Supervisory Board GmbH, Frankfurt am Main Member of the Supervisory Board Danzas Deutschland Holding GmbH, (since July 1, 2009) Düsseldorf Member and Deputy Chairman PB Spezial-Investmentaktiengesell- Member of the Supervisory Board DHL Freight GmbH, Düsseldorf of the Supervisory Board schaft mit Teilgesellschaftsvermögen, Member of the Administrative Board Bundesanstalt für Post und Telekom- (since July 30, 2009) Frankfurt am Main munikation Deutsche Bundespost, Deputy Chairman of the Postbank Vertriebsakademie GmbH, Bonn Supervisory Board Hamelin Member of the Board of Directors PB Capital Corp., Wilmington Deputy Chairman of the Deutsche Postbank International S.A., (since September 1, 2009) (Delaware, U.S.A.) Board of Directors Luxembourg Member of the Board of Directors PB (USA) Holdings, Inc., Wilmington Deputy Chairman of the Deutsche Postbank Vermögens- (since September 1, 2009) (Delaware, U.S.A.) Board of Directors Management S.A., Luxembourg Member of the Supervisory Board Betriebs-Center für Banken AG, Offices relinquished during the year Frankfurt am Main Deputy Chairman of the Deutsche Postbank Privat Investment Member of the Supervisory Board Postbank Filialvertrieb AG, Bonn Supervisory Board Kapitalanlagegesellschaft mbH, Bonn Member of the Supervisory Board PB Lebensversicherung AG, Hilden (until July 31, 2009) Member of the Supervisory Board PB Versicherung AG, Hilden * previously easytrade services GmbH, Leipzig Member of the Board of Directors VISA Deutschland e.V., Frankfurt am Main * previously easytrade services GmbH, Leipzig

160 Fiscal Year I Consolidated Financial Statements I Notes

The members of the Supervisory Board of Deutsche Postbank AG are: Offices held by members of the Supervisory Board of Deutsche Post- bank AG as of December 31, 2009 on supervisory boards or other 1. Shareholder representatives supervisory bodies: Frank Appel, Chairman of the Board of Management of Deutsche Post AG, Königswinter (Chairman) Shareholder representatives John Allan, Company Director, Virginia Water, U.K. until September 1, 2009 John Allan Member of the Supervisory Board Wilfried Boysen, businessman, Hamburg until September 1, 2009 For our Shareholders Henry B. Cordes, Ministerialdirektor, An unsere Investoren Federal Ministry of Finance, Berlin Function Company Edgar Ernst, management consultant, Bonn Chairman (since June 22, 2009) DSGi plc, Hemel Hempstead Tessen von Heydebreck, previously Member of the Board Member of the Supervisory Board Deutsche Lufthansa AG, Cologne of Management of Deutsche Bank AG and current Chairman of the Board of Deutsche Bank Foundation, Non-Executive Director National Grid plc, London Berlin since April 22, 2009 Non-Executive Director 3i plc, London Peter Hoch, Munich (since September 1, 2009) Ralf Krüger, management consultant, Kronberg Member of the Board of Directors ISS Holding A/S, Copenhagen Hans-Dieter Petram, Inning

Bernd Pfaffenbach, State Secretary, Federal Ministry Our Business Divisions Unsere Geschäftsfelder of Economics and Technology, Wachtberg-Pech until April 22, 2009 Wilfried Boysen Lawrence A. Rosen, Member of the Board of Management of Deutsche Post AG, Bonn since September 10, 2009 Function Company Elmo von Schorlemer, lawyer, Aachen until April 22, 2009 Member of the Supervisory Board ASKLEPIOS Kliniken Hamburg GmbH, Werner Steinmüller, Member of the Group Executive Hamburg Committee, Head of Global Transaction Banking, Deutsche Bank AG, Frankfurt am Main since April 22, 2009

Henry B. Cordes Our Responsibility Our Responsibility 2. Employee representatives Function Company Michael Sommer, Chairman of the German Trade Union Deputy Chairman of the TLG Immobilien GmbH, Berlin Federation, Berlin (Deputy Chairman) Supervisory Board Wilfried Anhäuser, Chairman of Postbank Filialvertrieb AG‘s Member of the Supervisory Board Flughafen Berlin-Schönefeld GmbH, General Works Council, Kerpen Berlin Marietta Auer, Head of Department, Deutsche Postbank AG, Member of the Supervisory Board T-Mobile International AG Head Office, Unterhaching (until February 28, 2009) Bonn Rolf Bauermeister, Head of National Postal Services Group, at ver.di Trade Union (national administration), Berlin Annette Harms, Deputy Chair of Deutsche Postbank AG’s Tessen von Heydebreck Member of the Supervisory Board Works Council, Hamburg since April 22, 2009

Elmar Kallfelz, Chairman of Deutsche Post AG‘s Group Management Report European Works Council and member of Deutsche Post AG’s Function Company General Works Council, Wachtberg Member of the Supervisory Board Dussmann Verwaltungs AG, Torsten Schulte, Head of Customer Service Center (since January 1, 2009) Frankfurt am Main of Postbank Direkt GmbH, Hessisch Oldendorf Member of the Supervisory Board Vattenfall Europe AG, Berlin Eric Stadler, Chairman of Deutsche Postbank AG’s Works Council, Markt Schwaben Member of the Supervisory Board BASF S.E., Ludwigshafen (until April 30, 2009) Gerd Tausendfreund, trade union secretary of the ver.di Trade Union, Nidderau Renate Treis, Deputy Chair of Deutsche Postbank AG‘s General Works Council, Brühl Peter Hoch Consolidated Financial Statements Function Company Member of the Supervisory Board BHW Holding AG, Berlin/Hamelin Member of the Supervisory Board BHW Bausparkasse AG, Hamelin Other Information

161 Fiscal Year I Consolidated Financial Statements I Notes

Ralf Krüger Employee representatives

Function Company Michael Sommer Chairman of the Supervisory Board DIAMOS AG, Sulzbach Chairman of the Supervisory Board KMS AG, Frankfurt am Main Function Company (until June 4, 2009) Member of the Supervisory Board Deutsche Telekom AG, Bonn Chairman of the Supervisory Board KMS Asset Management AG, Member of the Board of Kreditanstalt für Wiederaufbau, (until June 4, 2009) Frankfurt am Main Supervisory Directors Frankfurt am Main Member of the Supervisory Board Deutsche Post AG, Bonn (until April 21, 2009) Member of the Advisory Board CORPUS SIREO Holding Wilfried Anhäuser GmbH & Co. KG, Cologne

Function Company Member of the Supervisory Board Postbank Filialvertrieb AG, Bonn Hans-Dieter Petram

Function Company Rolf Bauermeister Member of the Supervisory Board Talanx AG, Hanover Function Company Member of the Supervisory Board Deutsche Post AG, Bonn Bernd Pfaffenbach Member of the Supervisory Board until April 22, 2009 Annette Harms Function Company Member of the Supervisory Board Lufthansa Cargo AG, Function Company Frankfurt am Main Member of the Supervisory Board Deutsche Post AG, Bonn Member of the Supervisory Board KfW-IPEX Bank, Frankfurt am Main

Elmar Kallfelz

Elmo von Schorlemer Member of the Supervisory Board Function Company until April 22, 2009 Member of the Administrative Board Bundesanstalt für Post und Telekommunikation Function Company Deutsche Bundespost, Bonn Chairman of the Supervisory Board Schneider Golling Die Assekuranz- makler AG, Düsseldorf Deputy Chairman of the Finum AG, Essen Torsten Schulte Supervisory Board Deputy Chairman of the Finum Finanzhaus AG, Essen Function Company Supervisory Board Deputy Chairman of the BHW Holding AG, Hamelin/Berlin Member of the Supervisory Board Hannover Direkt Versicherung AG, Supervisory Board Hanover Member of the Administrative Board Sparkassenzweckverband der Sparkasse Weserbergland, Hamelin

Werner Steinmüller Member of the Supervisory Board since April 22, 2009 Gerd Tausendfreund

Function Company Function Company Chairman of the Supervisory Board Deutsche Bank Portugal S.A., Lisbon Member of the Supervisory Board BHW Bausparkasse AG, Hamelin Member of the Supervisory Board Deutsche Bank S.A.E., Barcelona Member of the Supervisory Board Betriebs-Center für Banken AG, Member of the Supervisory Board OOO Deutsche Bank, Moscow Frankfurt am Main Member of the Supervisory Board ZAO „Deutsche Securities“, Moscow Member of the Board of Directors Deutsche Bank Luxembourg S.A., Luxembourg Renate Treis Member of the Advisory Board True Sale International GmbH, Frankfurt am Main Function Company Member of the General Assembly Erholungswerk Post, Postbank, of Members Telekom e.V., Stuttgart

162 Fiscal Year I Consolidated Financial Statements I Notes

(59) Auditors‘ fee in accordance with section 314 (1) Responsibility Statement no. 9 of the HGB To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give 2009 2008 a true and fair view of the assets, liabilities, financial position, €m €m and profit or loss of the Group, and the group management report includes a fair review of the development and performance of the Audits of the financial statements 8.8 7.2 business and the position of the Group, together with a description Other assurance of valuation services 3.7 5.2 of the principal opportunities and risks associated with the expected For our Shareholders Tax advisory services 0.1 0.6 development of the Group. An unsere Investoren Other services rendered to the parent company or subsidiaries 1.5 3.2 Bonn, February 23, 2010 Total 14.1 16.2 Deutsche Postbank Aktiengesellschaft

The Management Board (60) Declaration of compliance with the German Corporate Governance Code On December 18, 2009, the Management Board and the Supervisory Our Business Divisions

Board of Deutsche Postbank AG together published the declaration Unsere Geschäftsfelder of compliance with the German Corporate Governance Code for fiscal year 2009 required by section 161 of the Aktiengesetz (AktG – Stefan Jütte German Stock Corporation Act). The declaration of compliance can be accessed on the Internet on our homepage at www.postbank.com.

Mario Daberkow Marc Hess Our Responsibility Our Responsibility

Horst Küpker Michael Meyer Group Management Report Hans-Peter Schmid Ralf Stemmer Consolidated Financial Statements Other Information

163 I Auditors’ Report

We have audited the consolidated financial statements prepared by In our opinion based on the findings of our audit the consolidated the Deutsche Postbank AG comprising the statement of financial position, financial statements comply with the IFRSs as adopted by the EU, the statement of comprehensive income, statement of changes in and the additional requirements of German commercial law pursuant equity, cash flow statement and the notes to the consolidated financial to § 315a Abs. 1 HGB and give a true and fair view of the net assets, statements, together with the group management report for the financial position and results of operations of the Group in accordance business year from January 1 to December 31, 2009. The preparation with these requirements. The group management report is consistent of the consolidated financial statements and the group management with the consolidated financial statements and as a whole provides report in accordance with the IFRSs, as adopted by the EU, and a suitable view of the Group’s position and suitably presents the the additional requirements of German commercial law pursuant opportunities and risks of future development. to § (Article) 315a Abs. (paragraph) 1 HGB (“Handelsgesetzbuch”: German Commercial Code) is the responsibility of the parent Company’s Board of Managing Directors. Our responsibility is to Düsseldorf, February 24, 2010 express an opinion on the consolidated financial statements and on the group management report based on our audit. PricewaterhouseCoopers We conducted our audit of the consolidated financial statements in Aktiengesellschaft Wirtschaftsprüfungsgesellschaft accordance with § 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) Burkhard Eckes Christoph Theobald (IDW). Those standards require that we plan and perform the audit Wirtschaftsprüfer Wirtschaftsprüfer such that misstatements materially affecting the presentation of the (German Public Auditor) (German Public Auditor) net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of the entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by the Company´s Board of Managing Directors, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

164 Fiscal Year I Consolidated Financial Statements I Auditors´ Report I Other Information I Consolidated Income Statement – Quarterly Overview

Other Information

I Consolidated Income Statement – Quarterly Overview1

2009 2008 2009 2008 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Jan. – Dec. Jan. – Dec.

€m €m €m For our Shareholders

€m €m €m €m €m €m €m An unsere Investoren Interest income 1,868 1,901 2,009 2,209 2,636 2,475 2,510 2,317 7,987 9,938 Interest expense – 1,247 – 1,323 – 1,440 – 1,572 – 1,898 – 1,897 – 1,888 – 1,760 – 5,582 – 7,443 Net interest income 621 578 569 637 738 578 622 557 2,405 2,495 Allowance for losses on loans and advances – 308 – 142 – 120 – 108 – 194 – 143 – 86 – 75 – 678 – 498 Net interest income after allowance for losses on loans and advances 313 436 449 529 544 435 536 482 1,727 1,997 Fee and commission income 415 412 402 385 425 421 418 419 1,614 1,683

Fee and commission Our Business Divisions

expense – 73 – 70 – 65 – 77 – 65 – 59 – 68 – 60 – 285 – 252 Unsere Geschäftsfelder Net fee and commission income 342 342 337 308 360 362 350 359 1,329 1,431 Net trading income – 149 – 139 – 103 – 107 – 406 – 56 61 12 – 498 – 389 Net income from investment securities – 45 15 – 14 – 104 – 700 – 470 – 80 1 – 148 – 1,249 Administrative expenses – 765 – 696 – 719 – 684 – 808 – 741 – 718 – 702 – 2,864 – 2,969 Other income 84 36 38 29 93 39 44 42 187 218 Other expenses – 49 – 23 – 17 – 42 – 39 – 17 – 21 – 26 – 131 – 103

Profit/loss before tax – 269 – 29 – 29 – 71 – 956 – 448 172 168 – 398 – 1,064 Our Responsibility Our Responsibility Income tax 170 91 44 170 181 99 – 51 – 50 475 179 Profit/loss from ordinary activities after tax – 99 62 15 99 – 775 – 349 121 118 77 – 885 Minority interest 0 0 0 – 1 0 0 0 – 1 – 1 – 1 Consolidated net profit/loss – 99 62 15 98 – 775 – 349 121 117 76 – 886

I Condensed Statement of Comprehensive Income – Quarterly Overview1

2009 2008 2009 2008

Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Jan. – Dec. Jan. – Dec. Group Management Report €m €m €m €m €m €m €m €m €m €m Profit or loss from ordi nary activities after tax – 99 62 15 99 – 775 – 349 121 118 77 – 885 Other comprehensive income after tax 75 241 37 – 131 1,206 – 301 – 416 – 657 222 – 168 Change in revaluation reserve 108 343 49 – 195 1,580 – 437 – 540 – 805 305 – 202 thereof remeasurement gains/losses – 35 344 34 – 237 923 – 561 – 552 – 789 106 – 979 thereof disposals and impairment 143 – 1 15 42 657 124 12 – 16 199 777

Change in currency Consolidated Financial Statements translation reserve 5 – 6 – 7 8 3 27 – 2 – 28 0 0 Income tax relating to other comprehensive income – 38 – 96 – 5 56 – 377 109 126 176 – 83 34 Total comprehensive income for the period attributable to minority interest 0 0 0 – 1 0 0 0 – 1 – 1 – 1 Total comprehensive income – 24 303 52 – 33 431 – 650 – 295 – 540 298 – 1,054 Other Information

112 1Q1 to Q3 2009 and Q4 2008 figures restated (see Note 6)

165 Fiscal Year I Other Information I Consolidated Income Statement – Multi-Year Overview I Consolidated Balance Sheet – Multi-Year Overview

I Consolidated Income Statement – Multi-Year Overview

2005 2005 2006 2007 20081 2009 pro forma €m €m €m €m €m €m Interest income 5,350 7,045 7,650 8,384 9,938 7,987 Interest expense – 3,675 – 5,097 – 5,496 – 6,144 –7,443 – 5,582 Net interest income 1,675 1,948 2,154 2,240 2,495 2,405 Allowance for losses on loans and advances – 205 – 286 – 337 – 338 – 498 – 678 Net interest income after allowance for losses on loans and advances 1,470 1,662 1,817 1,902 1,997 1,727 Fee and commission income 801 1,560 1,623 1,675 1,683 1,614 Fee and commission expense – 102 – 181 – 216 – 246 – 252 – 285 Net fee and commission income 699 1,379 1,407 1,429 1,431 1,329 Net trading income 205 231 264 281 – 389 – 498 Net income from investment securities 252 270 292 294 – 1,249 – 148 Administrative expenses – 1,886 – 2,870 – 2,812 – 2,937 – 2,969 – 2,864 Other income 252 361 205 160 218 187 Other expenses – 273 – 318 – 232 – 137 – 103 – 131 Profit/loss before tax 719 715 941 992 – 1,064 – 398 Income tax – 226 – 225 – 245 – 135 179 475 Profit/loss from ordinary activities after tax 493 490 696 857 – 885 77 Minority interest – 1 – 1 – 1 – 1 – 1 – 1

Consolidated net profit or loss 492 489 695 856 – 886 76

Cost/income ratio (CIR) 66.6 % 75.0 % 68.3 % 69.2 % 129.8 % 92.7 %

Return on equity (RoE) before tax 15.0 % 14.9 % 18.9 % 19.2 % – 23.3 % – 7.8 % after tax 10.3 % 10.2 % 14.0 % 16.6 % – 19.4 % 1.5 %

112 12008 figures restated (see Note 6)

166 Fiscal Year I Other Information I Consolidated Income Statement – Multi-Year Overview I Consolidated Balance Sheet – Multi-Year Overview

I Consolidated Balance Sheet – Multi-Year Overview

Assets Dec. 31, 2005 Dec. 31, 2005 Dec. 31, 2006 Dec. 31, 2007 Dec. 31, 20081 Dec. 31, 2009 pro forma €m €m €m €m €m €m For our Shareholders Cash reserve 968 1,184 1,015 3,352 3,417 4,534 An unsere Investoren Loans and advances to other banks 17,801 21,306 16,350 24,560 18,684 14,467 Loans and advances to customers 52,873 80,488 87,182 92,064 105,318 111,043 Allowance for losses on loans and advances – 776 – 1,043 – 1,155 – 1,154 – 1,323 – 1,641 Trading assets 10,386 10,513 13,280 9,940 16,573 20,471 Hedging derivatives 639 639 485 421 474 520 Investment securities 55,423 61,748 63,299 68,582 83,058 72,359 Intangible assets 223 1,871 2,505 2,415 2,371 2,368 Property and equipment 750 1,055 941 927 879 838 Our Business Divisions Investment property 75 75 74 73 73 73 Unsere Geschäftsfelder Current tax assets 50 50 86 117 162 280 Deferred tax assets 434 818 244 522 863 552 Other assets 1,434 1,594 581 529 670 745 Assets held for sale – – – 565 – –

Total assets 140,280 180,298 184,887 202,913 231,219 226,609

Equity and Liabilities Dec. 31, 2005 Dec. 31, 2005 Dec. 31, 2006 Dec. 31, 2007 Dec. 31, 20081 Dec. 31, 2009 Our Responsibility Our Responsibility pro forma €m €m €m €m €m €m Deposits from other banks 30,778 40,582 47,319 61,146 62,790 39,318 Due to customers 78,481 98,958 101,316 110,696 117,472 131,988 Debt securities in issue 14,738 20,242 15,886 9,558 16,342 16,722 Trading liabilities 3,345 4,103 3,618 5,600 16,987 22,434 Hedging derivatives 1,668 1,668 958 873 2,693 2,051 Provisions 969 3,064 3,691 2,107 2,138 2,148 a) Provisions for pensions and other employee benefits 585 960 1,115 1,143 1,149 1,104

b) Other provisions 384 2,104 2,576 964 989 1,044 Group Management Report Current tax liabilities 77 77 84 122 192 174 Deferred tax liabilities 953 1,336 974 1,104 1,091 305 Other liabilities 427 784 786 835 826 711 Subordinated debt 3,783 4,423 5,048 5,603 5,736 5,507 Liabilities directly related to assets held for sale – – – 44 – – Equity 5,061 5,061 5,207 5,225 4,952 5,251 a) Issued capital 410 410 410 410 547 547 b) Share premium 1,160 1,160 1,160 1,160 2,010 2,010 c) Retained earnings 2,998 2,998 2,940 2,797 3,278 2,614 Consolidated Financial Statements d) Consolidated net profit/loss 492 492 695 856 – 886 76 Minority interest 1 1 2 2 3 4

Total equity and liabilities 140,280 180,298 184,887 202,913 231,219 226,609 Other Information

112 12008 figures restated (see Note 6)

167 Fiscal Year I Other Information I Segment Reporting – Multi-Year Overview

I Segment Reporting – Multi-Year Overview

Retail Banking Corporate Banking Transaction Banking Financial Markets Others Consolidation Group

2005 2006 2007 2008 2009 2005 2006 2007 20081 2009 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 2008 2009 2005 2006 2007 20081 2009 pro pro pro pro pro pro pro forma forma forma forma forma forma forma €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m

Net interest income 2,177 2,339 2,392 2,226 2,141 238 260 292 386 543 5 5 4 4 1 Net interest income 83 92 114 162 125 – 555 – 542 – 562 – 281 – 496 – 2 91 1,948 2,154 2,240 2,495 2,405 Net trading income 25 32 5 25 – 32 1 5 – 9 – 92 – 140 – – – – – Net trading income 55 46 72 – 6 47 150 181 213 – 325 – 282 9 – 91 231 264 281 – 389 – 498 Net income from Net income from investment securities 17 25 50 – 2 – 8 2 – 5 – 241 – 51 – – 1 – – – investment securities – 6 1 – 110 – 21 245 260 248 – 895 – 76 – 1 – 270 292 294 – 1,249 – 148 Net fee and Net fee and commission income 1,081 1,061 988 1,178 1,113 108 105 104 107 104 278 263 350 340 322 commission income 62 63 83 57 27 – 150 – 85 – 96 – 33 – 42 – 218 – 195 1,379 1,407 1,429 1,431 1,329

Balance sheet-related Balance sheet-related revenues 3,300 3,457 3,435 3,427 3,222 355 372 382 160 456 283 267 354 344 323 revenues 200 207 270 103 178 – 310 – 186 – 197 – 1,534 – 896 – 212 – 195 3,828 4,117 4,244 2,288 3,088

Administrative expenses – 2,301 – 2,178 – 2,210 – 2,220 – 2,136 – 165 – 171 – 163 – 171 – 180 – 263 – 245 – 331 – 312 – 317 Administrative expenses – 80 – 78 – 83 – 92 – 90 – 61 – 140 – 150 – 973 – 922 799 781 – 2,870 – 2,812 – 2,937 – 2,969 – 2,864 Allowance for losses Allowance for losses on loans and advances – 229 – 277 – 292 – 304 – 345 – 39 – 38 – 28 – 143 – 300 – – – – – on loans and advances 2 – 3 4 – 22 – 33 – 20 – 19 – 22 – 29 – – – – 286 – 337 – 338 – 498 – 678

Other income/expenses 36 – 78 2 26 29 – 2 2 – 1 – 2 3 5 13 16 33 Other income/expenses – 2 6 – 1 – 3 5 8 38 9 662 577 – 587 – 586 43 – 27 23 115 56

Profit/loss before tax 806 924 935 929 770 149 165 191 – 153 – 26 23 27 36 48 39 Profit/loss before tax 120 132 190 – 14 60 – 383 – 307 – 360 – 1,874 – 1,241 0 0 715 941 992 – 1,064 – 398

Cost/income ratio (CIR) 69.7 % 63.0 % 64.3 % 64.8 % 66.3 % 46.5 % 46.0 % 42.7 % 106.9 % 39.5 % 92.9 % 91.8 % 93.5 % 90.7 % 98.1 % Cost/income ratio (CIR) 40.0 % 37.7 % 30.7 % 89.3 % 50.6 % – – – – – 75.0 % 68.3 % 69.2 % 129.8 % 92.7 %

Return on equity before Return on equity before taxes (RoE) 29.2 % 32.7 % 32.4 % 41.9 % 34.9 % 43.2 % 46.7 % 50.5 % –37.4 % – 4.8 % – – – – – taxes (RoE) 22.0 % 23.8 % 37.2 % – 2.2 % 8.1 % 34.7 % 25.6 % – 26.3 % –145.9 % – 78.6 % 14.9 % 18.9 % 19.2 % – 23.3 % – 7.8 %

Segment assets 77,370 79,691 87,048 89,882 16,364 21,162 28,650 34,679 82 129 351 399 Segment assets 28,209 22,725 31,437 30,710 58,086 79,206 115,812 101,506 – 32,079 – 30,567 180,111 202,913 231,219 226,609

Segment liabilities 93,200 98,533 107,579 119,754 17,179 19,077 23,023 29,684 0 129 351 399 Segment liabilities 11,313 13,577 27,113 28,379 46,447 71,597 105,232 78,960 – 32,079 – 30,567 168,139 202,913 231,219 226,609

112 12008 figures restated (see Note 6)

168 Fiscal Year I Other Information I Segment Reporting – Multi-Year Overview For our Shareholders

Retail Banking Corporate Banking Transaction Banking Financial Markets Others Consolidation Group An unsere Investoren

Net fee and Net fee and Our Business Divisions Unsere Geschäftsfelder commission income 1,081 1,061 988 1,178 1,113 108 105 104 107 104 278 263 350 340 322 commission income 62 63 83 57 27 – 150 – 85 – 96 – 33 – 42 – 218 – 195 1,379 1,407 1,429 1,431 1,329

Other income/expenses 36 – 78 2 26 29 – 2 2 – 1 – 2 3 5 13 16 33 Other income/expenses – 2 6 – 1 – 3 5 8 38 9 662 577 – 587 – 586 43 – 27 23 115 56 Our Responsibility

112 1Prior-period figures restated (see Note 6)

169 I International Financial Reporting Standards (IFRSs)

International Financial Reporting Standards (IFRSs) applied as of December 31, 2009

Standard 1 Status Original Title German Title Effective since 2 Adopted by EU (last amendment) Regulation3

1. International Financial Reporting Standards (IFRSs) 4

1.1. International Accounting Standards (IASs) IAS 1 rev. 2007 Presentation of Financial Darstellung des Jan. 1, 2007 1126/2008, Nov. 3, 2008 Statements Abschlusses IAS 2 rev. 1993 Inventories Vorräte Jan. 1, 2005 1126/2008, Nov. 3, 2008 IAS 7 rev. 1992 Cash Flow Statements Kapitalflussrechnungen Jan. 1, 1994 1126/2008, Nov. 3, 2008 IAS 8 rev. 2003 Accounting Policies, Bilanzierungs- und Jan. 1, 2005 1126/2008, Nov. 3, 2008 Changes in Accounting Bewertungsmethoden, Estimates and Errors Änderungen von Schätzungen und Fehler IAS 10 rev. 2003 Events after the Balance Ereignisse nach dem Jan. 1, 2005 1126/2008, Nov. 3, 2008 Sheet Date Bilanzstichtag IAS 12 rev. 2000 Income Taxes Ertragsteuern Jan. 1,1998 1126/2008, Nov. 3, 2008 IAS 16 rev. 2003 Property, Plant and Sachanlagen Jan. 1, 2005 1126/2008, Nov. 3, 2008 Equipment IAS 17 rev. 2003 Leases Leasingverhältnisse Jan. 1, 2005 1126/2008, Nov. 3, 2008 IAS 18 rev. 1993 Revenue Erträge Jan. 1, 1995 1126/2008, Nov. 3, 2008 IAS 19 2004 Employee Benefits Leistungen an Nov. 1, 2005 1126/2008, Nov. 3, 2008 Arbeitnehmer IAS 21 2005 The Effects of Changes in Auswirkungen von Ände- Jan. 1, 2008 1126/2008, Nov. 3, 2008 Foreign Exchange Rates rungen der Wechselkurse IAS 23 rev. 2007 Borrowing Costs Fremdkapitalkosten Jan. 1, 2009 1260/2008, Dec. 10, 2008 IAS 24 rev. 2003 Related Party Disclosures Angaben über Bezie- Jan. 1, 2006 1126/2008, Nov. 3, 2008 hungen zu nahestehen- den Unternehmen und Personen IAS 27 rev. 2003 Consolidated and Konzern- und separate Jan. 1, 2006 1126/2008, Nov. 3, 2008 Separate Financial Einzelabschlüsse nach Statements IFRS IAS 28 rev. 2003 Investments in Associates Anteile an assoziierten Jan. 1, 2006 1126/2008, Nov. 3, 2008 Unternehmen IAS 31 rev. 2003 Interests in Joint Ventures Anteile an Joint Ventures Jan. 1, 2005 1126/2008, Nov. 3, 2008 IAS 32 rev. 2003 Financial Instruments: Finanzinstrumente: Jan. 1, 2005 1126/2008, Nov. 3, 2008 (2008) Disclosure and Angaben und Presentation Darstellung IAS 33 rev. 2003 Earnings per Share Ergebnis je Aktie Jan. 1, 2005 1126/2008, Nov. 3, 2008 IAS 34 1998 Interim Financial Reporting Zwischenberichterstattung Jan. 1, 1999 1126/2008, Nov. 3, 2008 IAS 36 rev. 2004 Impairment of Assets Wertminderung von March 31, 2004 1126/2008, Nov. 3, 2008 Vermögenswerten IAS 37 1998 Provisions, Contingent Rückstellungen, Eventual- July 1, 1999 1126/2008, Nov. 3, 2008 Liabilities and Contingent schulden und Eventual- Assets forderungen IAS 38 rev. 2004 Intangible Assets Immaterielle Vermögens- March 31, 2004 1126/2008, Nov. 3, 2008 werte IAS 39 2005 Financial Instruments: Finanzinstrumente: Jan. 1, 2006 1126/2008, Nov. 3, 2008 (2009) Recognition and Ansatz und Bewertung Measurement IAS 40 rev. 2003 Investment Property Als Finanzinvestition Jan. 1, 2005 1126/2008, Nov. 3, 2008 gehaltene Immobilien

170 Fiscal Year I Other Information I International Financial Reporting Standards (IFRSs)

Standard 1 Status Original Title German Title Effective since 2 Adopted by EU (last amendment) Regulation3

1.2. International Financial Reporting Standards (IFRSs) 4 IFRS 3 rev. 2004 Business Combinations Unternehmenszusammen- March 31, 2004 1126/2008, Nov. 3, 2008 schlüsse IFRS 4 2005 Insurance Contracts Versicherungsverträge Jan. 1, 2006 1126/2008, Nov. 3, 2008 IFRS 5 2004 Non-current Assets Held Zur Veräußerung gehaltene Jan. 1, 2005 1126/2008, Nov. 3, 2008 For our Shareholders

for Sale and Discountinued langfristige Vermögenswerte An unsere Investoren Operations und aufgegebene Geschäftsbereiche IFRS 7 2004 Financial Instruments: Finanzinstrumente: Jan. 1, 2007 1126/2008, Nov. 3, 2008 (2009) Disclosures Angaben IFRS 8 2007 Operating Segments Geschäftssegmente Jan. 1, 2009 1358/2007, Nov. 21, 2007

1.3. Standard Interpretation Committee (SIC) SIC-12 2004 Consolidation – Special Konsolidierung – Jan. 1, 2005 1126/2008, Nov. 3, 2008 (2005) Purpose Entities Zweckgesellschaften

1.4. International Financial Reporting Interpretation Committee (IFRIC) Our Business Divisions Unsere Geschäftsfelder IFRIC 4 2004 Determining whether an Feststellung, ob eine Jan. 1, 2006 1126/2008, Nov. 3, 2008 Arrangement Contains Vereinbarung ein Leasing- a Lease verhältnis enthält IFRIC 9 2006 Reassessment of Neubeurteilung einge- Jan. 1, 2007 1126/2008, Nov. 3, 2008 (2009) Embedded Derivatives betteter Derivate IFRIC 10 2006 Interim Financial Zwischenberichterstattung Jan. 1, 2007 1126/2008, Nov. 3, 2008 Reporting and Impairment und Wertminderung

2. Deutscher Rechnungslegungs Standard (DRS) 5 – German Accounting Standards (GASs)

DRS 5-10 2005 n. r. Risikoberichterstattung Jan. 1, 2005 n. r. Our Responsibility von Kredit- und Finanz- dienstleistungsinstitu- tionen DRS 15 rev. 2005 n. r. Lageberichterstattung Jan. 1, 2003/Jan. 1, 2004/ n. r. Jan. 1, 2005 DRS 15a 2007 n. r. Übernahmerechtliche Dec. 31, 2008 n. r. Angaben und Erläuterungen im Konzernlagebericht DRS 16 2008 n. r. Zwischenberichterstattung Jan. 1, 2008 n. r. DRS 17 2007 n. r. Berichterstattung über die Dec. 31, 2008 n. r. Vergütung der Organ-

mitglieder Group Management Report

3. Kapitalmarktorientierte Vorschriften – Capital market-oriented provisions WpHG 2007 n. r. Wertpapierhandelsgesetz; Jan. 1, 2007 n. r. insbesondere § 37v bis § 37z DCGK i.V.m. § 161 AktG 2008 n. r. Deutscher Corporate Dec. 31, 2008 n. r. Governance Kodex FWBO 2008 n. r. Frankfurter Wertpapier- Aug. 15, 2008 n. r. börsenordnung Key: 1 Not all pronouncements that exist as of the reporting date are listed, but only those that are relevant to the Postbank Group. 2 The date from which application is compulsory in accordance with IFRSs; voluntary, earlier application is often possible. Should Postbank voluntarily apply a Consolidated Financial Statements pronouncement earlier, this is explicitly referred to in the Notes. 3 In accordance with section 315a (1) HGB in conjunction with the IAS Regulation (EU Regulation 1606/2002), Postbank is obliged to apply the IFRSs adopted by the EU (endorsement). The date shown corresponds to the date of approval by the European Commission (publication in the EU Official Journal follows shortly thereafter). As a rule, the date of application of the IFRSs adopted by the EU is the same date as given in the standards (see “Effective since” column). Should the EU adopt an IFRS in the period after the balance sheet date and before the day that the annual financial statements are signed, this IFRS may be applied in the annual financial statements (clarification by the European Commission at the ARC meeting on November 30, 2005). 4 IFRSs: a generic term for all financial reporting standards published by the International Accounting Standards Board (IABS). Also the name for new financial reporting standards issued by the IABS since 2003. The pronouncements issued up to 2002 continue to be referred to as International Accounting Standards (IASs). IASs are only renamed IFRSs if fundamental changes are made to standards. 5 Deutsche Rechnungslegungs Standards (German Accounting Standards-GASs) are applied if they pertain to items that are to be accounted for in accordance with section 315a HGB and are not already governed by IFRSs themselves. 6 On November 3, 2008, the European Commission adopted the consolidated version of all International Financial Reporting Standards (IFRSs) currently in force Other Information in the EU. This version contains all IFRSs that have been adopted to date, including the latest amendments adopted as of October 15, 2008, to ensure that the the companies must only draw on one legal instrument in the future. The consolidated version supersedes eighteen individual regulations to date and replaces Regulation no. 1725/2003 of September 29, 2003 as well as all other amendments made up to October 15, 2008.

171 I Executive Bodies

Management Board

Stefan Jütte, Bonn Chairman since July 1, 2009

Wolfgang Klein, Bonn Chairman until June 30, 2009

Dirk Berensmann, Unkel until May 29, 2009

Mario Daberkow, Bonn since May 30, 2009

Marc Hess, Bonn since January 1, 2009

Horst Küpker, Bad Honnef

Michael Meyer, Bonn

Hans-Peter Schmid, Baldham

Ralf Stemmer, Königswinter

172 Fiscal Year I Other Information I Executive Bodies

Supervisory Board For our Shareholders Frank Appel, Königswinter Lawrence A. Rosen, Bonn An unsere Investoren Chairman, Member of the Board of Management of Deutsche Post AG, Chairman of the Board of Management of Deutsche Post AG since September 10, 2009

Michael Sommer*, Berlin Elmo von Schorlemer, Aachen Deputy Chairman, Lawyer, Chairman of the German Trade Union Federation until April 22, 2009

John Allan, Virginia Water, U.K. Torsten Schulte*, Hessisch Oldendorf Company Director, Head of Customer Service Center of Postbank Direkt GmbH

until September 1, 2009 Our Business Divisions Eric Stadler*, Markt Schwaben Unsere Geschäftsfelder Wilfried Anhäuser*, Kerpen Chairman of Deutsche Postbank AG‘s Works Council Chairman of the General Works Council of Postbank Filialvertrieb AG Werner Steinmüller, Frankfurt Marietta Auer*, Unterhaching Global Head of Transaction Banking Deutsche Bank AG, Head of Department, Deutsche Postbank AG, Head Office Member of the Group Executive Committee, since April 22, 2009 Rolf Bauermeister*, Berlin Head of National Postal Services Group, Gerd Tausendfreund*, Nidderau at ver.di Trade Union (national administration) Trade union secretary of the ver.di Trade Union Our Responsibility

Wilfried Boysen, Hamburg Renate Treis*, Brühl Businessman Deputy Chair of Deutsche Postbank AG‘s General Works Council

Edgar Ernst, Bonn Management consultant

Henry B. Cordes, Berlin *Employee representatives Ministerialdirektor, Federal Ministry of Finance

Annette Harms*, Hamburg Deputy Chair of Deutsche Postbank AG’s Works Council, Group Management Report Hamburg

Tessen von Heydebreck, Berlin previously Member of the Board of Management of Deutsche Bank AG and current Chairman of the Board of Deutsche Bank Foundation, since April 22, 2009

Peter Hoch, Munich

Elmar Kallfelz*, Wachtberg

Chairman of Deutsche Post AG‘s European Consolidated Financial Statements Works Council and member of Deutsche Post AG‘s General Works Council

Ralf Krüger, Kronberg Management consultant

Hans-Dieter Petram, Inning Other Information Bernd Pfaffenbach, Wachtberg-Pech State Secretary, Federal Ministry of Economics and Technology, until April 22, 2009

173 I Group Structure1

Deutsche Postbank AG

Group Management Finance Retail Banking Branch Sales Stefan Jütte Marc Hess Michael Meyer Hans-Peter Schmid

Corporate Accounting and Retail Banking and Development Taxes Cooperation Strategies

Corporate Product Management Controlling Communication Accounts and Loans

Investor Relations and Product Management Internal Audit Research Investment and CRM

Operational Controlling, Chief Risk Officer 2 Business Customers Markets

Operational Controlling, Lending Policy Third-Party Sales IT / Back Office

Risk Controlling Reporting and Systems Direct Banking

Sales and Cooperations Risk Management Management

BHW Postbank PB Firmenkunden AG Bausparkasse AG Filialvertrieb AG

PB Capital Postbank Corporation Finanzberatung AG

Postbank BHW Leasing GmbH Immobilien GmbH

Deutsche Postbank PB Factoring GmbH Home Finance Ltd.

1 including selected subsidiaries 2 CRO is authorized to issue instructions to the Lending Policy, Risk Controlling, and Risk Management divisions

174 Fiscal Year I Other Information I Group Structure For our Shareholders An unsere Investoren

Financial Markets IT / Operations Resources / Lending Horst Küpker Mario Daberkow Ralf Stemmer

Lean Banking and Capital Markets HR Strategy Complaints

Account Business Center Treasury Management Management Our Business Divisions Unsere Geschäftsfelder

Liquidity Management Financial Markets Operations HR Management

Credit Services, HR Executives and Credit Treasury Home Savings / Mortgage Lending HR Development

Credit Services, Legal Affairs Consumer Loans and Workout Our Responsibility

Central Procurement / Real Estate, Support, Portfolio Management Security

Employees and Trustee Customers

Lending 3 Group Management Report

Domestic Lending

International Lending

Deutsche Postbank Postbank Postbank Vertriebs- International S.A. Systems AG akademie GmbH Luxembourg Consolidated Financial Statements Deutsche Postbank Betriebs-Center für Vermögens-Management S.A. Banken AG Luxembourg Deutsche Postbank Financial Services GmbH Other Information

3Lending is authorized to issue instructions to the Domestic Lending and International Lending divisions

175 I Glossary

Amortized cost The amount at which a financial asset or liability was measured at initial recognition, minus principal repayments, plus or minus the reversal of a premium/discount, and minus any writedowns.

Asset-backed securities A special type of securitization of claims for payment relating to tradable securities. The securities concerned are created by bundling together certain financial assets.

Associate An entity that is included in the consolidated financial statements using the equity method rather than full or proportionate consolidation, and over whose business or financial policies a consolidated company has significant influence.

Available for sale AfS Financial assets that are available for sale (see Available-for-sale securities).

Available-for- Securities which are not allocated to either the held for trading or the loans and receivables categories and, in the sale securities case of debt securities, which are not held to maturity. They are carried at fair value. Changes in fair values are generally recognized directly in the revaluation reserve in equity. If, due to lasting impairment, the fair value of a security is lower than its amortized cost, the difference between these amounts is expensed (see Impairment). Realized gains and losses are also recognized in income.

Backtesting Procedure for monitoring the quality of value-at-risk models (VaR). Backtesting is used to check whether, retrospectively over a longer period of time, the estimated potential losses based on the VaR approach were actually exceeded substantially more regularly than would be expected given the confidence level applied (see Confidence level).

Banking book Risk positions that are not allocated to the trading book.

Basis point value (bpv) The bpv expresses the change in the present value of a financial instrument if the interest rate changes by one basis point (0.01 %).

Cash flows Inflows and outflows of cash and cash equivalents.

Cash flow hedge Cash flow hedges are primarily taken to mean hedges against the risk associated with future interest payments from a variable-interest recognized transaction by means of a swap. They are measured at their fair values.

Cash flow statement Calculation and presentation of the cash flow generated or consumed by an enterprise during a fiscal year as a result of its operating, investing, and financing activities, as well as an additional reconciliation of the cash and cash equivalents (cash reserve) at the beginning and the end of the fiscal year.

CDOs Collateralized debt obligations – Loans and other debt instruments that are secured by various assets.

CDSs Credit default swaps – Financial instruments used to assume the credit risk of a reference asset (e.g., securities or loans). The buyer pays a premium to the seller and receives a compensation payment if a predetermined credit event occurs.

CLOs Collateralized loan obligations – Securities that are backed by a pool of loan obligations as collateral.

CMBSs Commercial mortgage-backed securities – Securities that are generally backed by commercial real estate mortgages.

176 Fiscal Year I Other Information I Glossary

Commercial paper Short-term, unsecured debt instruments with flexible maturities (max. 270 days) from prime-rated issuers. They allow companies to cover their short-term financing requirements directly with major investors. For our Shareholders An unsere Investoren

Confidence level The probability that a potential loss will not exceed an upper limit defined by value at risk.

Counterparty This relates to the risk of loss due to changes in creditworthiness or default by a counterparty. Counterparty credit credit risk risk includes credit (issuer) risk, country or transfer risk, and counterparty risk. Credit risk is defined as possible losses arising from the inability of a counterparty to discharge its payment obligations, or from a deterioration in its credit rating. Country or transfer risk can arise during cross-border payments due to the unwillingness (political risk) or inability (economic risk) of a country to discharge its payment obligations. Counterparty risk denotes the risk of

losses arising from the default of a counterparty in relation to the settlement of payment obligations or its failure Our Business Divisions Unsere Geschäftsfelder to discharge its payment obligations in a timely manner.

CPPI Constant proportion portfolio insurance – Capital-guaranteed promissory note loans

Currency risk The risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.

Deferred taxes Income tax to be paid or received as a result of differences between the carrying amounts in the IFRS financial accounts and the tax base. At the date of recognition, deferred taxes do not yet represent actual amounts receivable from or Our Responsibility due to tax authorities.

Derivative A financial instrument whose own value is dependent on the value of another financial instrument. The price of a derivative is derived from the price of an underlying equity, currency, interest rate, etc. These instruments provide additional options for risk management and control.

Discount The negative difference between the historial cost of a financial instrument and its notional value.

Discounted The DCF method is a recognized valuation technique for calculating fair value in inactive markets. It discounts future Group Management Report cash flow (DCF) cash flows using the current discount rate.

Effective interest The amortization of differences between cost and notional value (premium/discount) using the effective interest rate method of a financial asset or financial liability. The effective interest rate is the rate that exactly discounts the expected stream of future cash payments through maturity or the next market-based repricing date to the current net carrying amount of the financial asset or financial liability.

Embedded derivatives Embedded derivatives form part of a nonderivative financial instrument and are inseparably linked with the

instrument (“hybrid” financial instruments, such as equity-linked bonds). These components are legally and Consolidated Financial Statements economically linked, but are accounted for separately under certain circumstances.

Equity method Method of accounting for investments in companies over whose business policies a consolidated company has significant influence (associates). Under the equity method, the investor’s share of the net income/loss of the investee is credited/charged to the carrying amount of the investment. Distributions reduce the carrying amount by the investor’s proportionate share of the distribution. Other Information

177 Fair value The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in (full fair value) an arm’s length transaction. The fair value of an asset or liability is often the same as its market price.

Fair value hedge Fair value hedges primarily relate to fixed-interest balance sheet items (e.g. receivables, equities, or securities), which are hedged against market risk by means of a derivative. They are measured at their fair values.

Fair Value Option In accordance with the fair value option, financial assets or financial liabilities may be (voluntarily) designated at fair (FVO) value through profit or loss, provided this leads – among other things – to the elimination or significant reduction of inconsistencies in the measurement or recognition (accounting mismatches).

Financial instruments These are in particular loans and receivables, interest-bearing securities, equities, investments, liabilities, and derivatives.

German Accounting Recommendations on the application of (German) consolidated accounting principles, published by the Deutscher Standards (GASs) Standardisierungsrat (DSR – German Accounting Standards Board/GASB), a body of the Deutsches Rechnungs- legungs Committee e. V. (DRSC – Accounting Standards Committee of Germany/Standard ASCG).

Hedge accounting Presentation of the opposing performance of a hedging instrument (e. g. an interest rate swap) and the related hedged item (e. g. a loan). The objective of hedge accounting is to minimize the impact on the income statement of the measurement and recognition in income of gains and losses on the remeasurement of derivatives.

Hedge fair value Remeasurement gains or losses on hedged items including determination of unhedged risk factors.

Hedges Transactions whose change in fair value offsets the change in the fair value of the hedged item.

Hedging A strategy by which transactions are entered into for the purpose of obtaining protection against the risk of unfavorable price developments (interest rates, share prices).

Held-to-maturity Financial assets with fixed or determinable payments and fixed maturity which an enterprise intends and is able to investments (HtM) hold to maturity, with the exception of loans and advances originated by the enterprise.

Impairment Amount by which the amortized cost of a financial instrument exceeds its estimated recoverable amount on the market.

International Financial This is both the generic term for all financial reporting standards (IFRSs) issued by the International Accounting Reporting Standards Standards Board (IASB) and for new financial reporting standards issued by the IASB since 2003. The standards (IFRSs) issued up to 2002 are still published as International Accounting Standards (lASs).

Investment property Land and/or buildings held to earn rentals or for capital appreciation and not used in the production or supply of goods or services or for administrative purposes.

Liquidity risk Describes the risk of being unable to meet current and future payment obligations, either as they fall due or in the full amount due. The funding risk arises when the necessary liquidity cannot be obtained on the expected terms when required.

Loans and receivables Loans and receivables are financial assets that are not quoted in an active market. These include in particular receivables and certain investment securities.

178 Fiscal Year I Other Information I Glossary

Loss identification The period between the date when a borrower defaults and the date when the bank becomes aware of the default. period (LIP) The LIP factor is used in calculating the portfolio-based valuation allowance in accordance with IASs/IFRSs, as well For our Shareholders as when quantifying the incurred loss. An unsere Investoren

Market risk Market risk refers to potential losses from financial transactions that may be triggered by changes in interest rates, volatility, foreign exchange rates, and share prices. The changes in value are derived from daily marking to market, irrespective of the carrying amounts of assets and liabilities.

Marking to market Valuation of all of an enterprise’s proprietary trading activities at current market prices including unrealized gains, ignoring their historical cost. Our Business Divisions Unsere Geschäftsfelder Net trading income Balance of income and expenses from proprietary trading in securities, financial instruments (in particular derivatives), foreign currencies, and precious metals valued at market prices.

Netting agreements Agreements whereby, under certain circumstances, receivables between two parties can be offset against each other, such as in the event of insolvency. The inclusion of a legally binding netting agreement reduces the default risk from a gross to a net amount.

Operational risk Operational risk is defined by Basel II as “the risk of direct or indirect loss resulting from inadequate or failed Our Responsibility internal processes, people and systems or from external events”. In accordance with the Basel II definition this also includes legal risks.

Option Right to purchase (call option) or sell (put option) an underlying asset, such as securities or currency, from a counterparty (option writer) at a predetermined price and at a specific date or during a specific period.

OTC derivatives Non-standardized financial instruments (derivatives) which are traded not on a stock exchange, but directly between market participants (over the counter). Group Management Report Portfolio Similar transactions, particularly in securities or derivatives, grouped together according to price risk criteria.

Premium The positive difference between the historical cost of a financial instrument and its notional value.

Rating External rating: standardized evaluation of an issuer’s creditworthiness and debt instruments carried out by specialist agencies. Internal rating: detailed risk assessment of every exposure associated with a debtor.

Recovery rate The recovery rate indicates the percentage of a receivable that a creditor receives following the realization of

collateral and other rights in the case of a debtor default, taking the economic loss into account. Consolidated Financial Statements

Repos (repurchase Agreements to repurchase securities (genuine repurchase agreements in which the subject of the agreement is still agreements) allocated to the borrower). From the perspective of the lender, such agreements are known as reverse repos.

Return on equity Fundamental ratio showing the relationship between the results of operations of an enterprise (net profit for the (RoE) period) and the capital employed (net profit as a percentage of average capital employed over the period). Other Information

179 Revaluation reserve Changes in the fair values of available-for-sale financial instruments and the related deferred tax effects are recognized directly in the revaluation reserve in equity.

Reverse repos see Repos (repurchase agreements)

Securities loan The lending of fixed-income securities or equities; a distinction is made between closed term (retransfer of the same type and quantity of securities at an agreed date in the future) and open term (securities are made available until future notice) loans.

Securitization The replacement of loans, or the financing of various kinds of loans and advances, by issuing securities (such as bonds or commercial paper).

Segment reporting Disclosure of an enterprise’s assets and earnings, broken down by area of activity (division) and geographical area (region).

Sell-and-buy-back A combination of two purchase agreements, i.e., a separate agreement for each of the spot and forward trades.

Sustainability The idea behind the principle of sustainable development is that companies accept responsibility for the social and ecological aspects of their business decisions. In addition, as corporate citizens, they actively address social and environmental issues (including climate protection) and take focused measures to support their implementation.

Swap Exchange of cash flows. Interest rate swap: exchange of flows of interest payments denominated in the same currency but with different terms (e. g. fixed/variable rates). Currency swap: exchange of cash flows and principal amounts denominated in different currencies.

Trading assets This balance sheet item contains securities, promissory note loans, foreign currencies, precious metals, and derivatives held for trading and measured at their fair values.

Trading book A banking regulatory term for positions in financial instruments, shares, and tradable claims held by a bank that are intended for resale in the short term in order to benefit from price and interest rate fluctuations. This also includes transactions that are closely associated with trading book positions, e.g., for hedging purposes. Risk positions not belonging to the trading book are allocated to the banking book.

Trading liabilities This balance sheet item contains derivatives used for proprietary trading with negative fair values, and delivery obligations under securities sold short. They are carried at their fair values.

Underlying The original instrument on which a warrant, certificate, or forward contract is based. An underlying can be, for example, a share, currency, or a bond.

Unwinding Recognition in profit or loss of changes in the present value of expected future cash flows from impaired loans due to the passage of time.

Value-at-risk model VaR is a method of quantifying risks. VaR is currently used primarily in conjunction with the measurement of market risk. (VaR) In order to provide meaningful information, the holding period (e.g., 10 days) and the confidence level (see Confidence level) (e. g., 99.0 %) must also be disclosed. The VaR thus describes the potential future loss that will not be exceeded during the holding period with a probability equal to the confidence level.

180 Fiscal Year I Other Information I Glossary

Volatility Price fluctuation of a security or a currency, often calculated in terms of standard deviation on the basis of historical performance, or implicitly on the basis of a price-setting formula. The higher the volatility, the higher the risk For our Shareholders associated with holding the investment. An unsere Investoren Our Business Divisions Unsere Geschäftsfelder Our Responsibility Our Responsibility Group Management Report Consolidated Financial Statements Other Information

181 I Contact Details

Deutsche Postbank AG BHW Immobilien GmbH Postbank Direkt GmbH Head Office Lubahnstraße 2 Kennedyallee 62 – 70 Friedrich-Ebert-Allee 114 – 126 31789 Hameln, Germany 53175 Bonn, Germany 53113 Bonn, Germany Postfach 1013 42 Postfach 40 00 Postfach 40 00 31763 Hameln, Germany 53105 Bonn, Germany 53105 Bonn, Germany Phone: +49 180 4440 500 Phone: +49 228 920 - 0 Phone: +49 228 920 - 0 Fax: +49 5151 18 - 5101 Fax: +49 228 920 - 35151 Fax: +49 228 920 - 35151 E-mail: info@bhw-immobilien.de E-mail: [email protected] Internet: www.postbank.com E-mail: [email protected] Deutsche Postbank Financial Services GmbH Postbank Filialvertrieb AG Ludwig-Erhard-Anlage 2 – 8 Friedrich-Ebert-Allee 114 – 126 60325 Frankfurt am Main, Germany 53113 Bonn, Germany Postfach 15 02 55 Postfach 40 00 60062 Frankfurt am Main, Germany 53105 Bonn, Germany Phone: +49 69 789 86 - 0 Phone: +49 228 920 - 0 Fax: +49 69 789 86 - 58001 Fax: +49 228 920 - 35151 E-mail: [email protected] E-mail: [email protected]

Deutsche Postbank Home Finance Ltd. Postbank Finanzberatung AG Corp. Office, 201, 2nd Floor, Lubahnstraße 5 Vipul Agora, M.G. Road, 31789 Hameln, Germany Gurgaon – 12 20 02 Postal address: India 31789 Hameln, Germany Phone: +91 124 4724100 Phone: +49 1803 2881 Fax: +91 124 4724101 Fax: +49 5151 18 - 3001 E-mail: [email protected] E-mail: [email protected]

Deutsche Postbank International S.A. Postbank Leasing GmbH PB Finance Center Friedrich-Ebert-Allee 114 – 126 18–20, Parc d’Activité Syrdall 53113 Bonn, Germany 5365 Munsbach, Luxembourg Postfach 40 00 Postal address: 53105 Bonn, Germany 2633 Luxembourg, Luxembourg Phone: +49 1805 72 53 - 27 Phone: +352 34 95 31 - 1 Fax: +49 1805 72 53 - 28 Fax: +352 34 95 32 - 550 E-mail: [email protected] E-mail: [email protected] Postbank P.O.S. Transact GmbH easyhyp GmbH Frankfurter Straße 71 – 75 Lubahnstraße 2 65760 Eschborn, Germany 31789 Hameln, Germany Phone: +49 6196 96 96 - 0 Subsidiaries Phone: +49 800 044 8888 Fax: +49 6196 96 96 - 200 E-mail: [email protected] E-mail: [email protected] Betriebs-Center für Banken AG Eckenheimer Landstraße 242 PB Capital Corporation Postbank Support GmbH 60320 Frankfurt am Main, Germany 230 Park Avenue Edmund-Rumpler-Straße 3 Postal address: 19 & 20th Floor 51149 Köln, Germany 60290 Frankfurt am Main, Germany New York, NY 10169 Phone: +49 2203 560 - 0 Phone: +49 69 689 76 - 0 U.S.A. Fax: +49 2203 560 - 4009 Fax: +49 69 689 76 - 5099 Phone: +1212 756 - 5500 E-mail: [email protected] Fax: +1212 756 - 5536 Postbank Systems AG E-mail: [email protected] Baunscheidtstraße 8 Betriebs-Center für Banken 53113 Bonn, Germany Processing GmbH PB Factoring GmbH Postfach 26 0146 Eckenheimer Landstraße 242 Friedrich-Ebert-Allee 114 – 126 53153 Bonn, Germany 60320 Frankfurt am Main, Germany 53113 Bonn, Germany Phone: +49 228 920 - 0 Postal address: Postfach 40 00 Fax: +49 228 920 - 63010 60290 Frankfurt am Main, Germany 53105 Bonn, Germany E-mail: [email protected] Phone: +49 69 68 97 60 Phone: +49 180 50905 - 22 Fax: +49 69 156 22 011 Fax: +49 180 50905 - 33 VÖB-ZVD Bank für E-mail: [email protected] E-mail: [email protected] Zahlungsverkehrsdienstleistungen GmbH Godesberger Allee 88 BHW Bausparkasse AG PB Firmenkunden AG 53175 Bonn, Germany Lubahnstraße 2 Friedrich-Ebert-Allee 114 – 126 Postfach 26 0132 31789 Hameln, Germany 53113 Bonn, Germany 53153 Bonn, Germany Postfach 1013 22 Postfach 40 00 Phone: +49 228 9377 - 0 31781 Hameln, Germany 53105 Bonn, Germany Fax: +49 228 9377 - 599 Phone: +49 5151 18 - 0 Phone: +49 180 3040 - 636 E-mail: [email protected] Fax: +49 5151 18 - 3001 Fax: +49 180 3040 - 696 E-mail: [email protected] E-mail: [email protected]

182 Milestones in fiscal year 2009 Financial Calendar 2010 Contacts Milestones 200 9/ Financial Calendar 2010

I July 3, 2009 Postbank issued its first public-sector Pfandbrief with a volume of €1 billion. On August 20, 2009, the total was increased to €1.5 billion.

The English version of the Group Annual Report constitutes a translation of the original German version. Only the German version is legally binding. Deutsche Postbank 2009 Group Annual Report

Postbank Group in figures 2009 2009 Group Annual Report

Jan. 1 – Dec. 31, 2009 Jan. 1 – Dec. 31, 2008 1

Consolidated income statement Total income €m 3,088 2,288 Administrative expenses €m – 2,864 – 2,969 20 Loss before tax €m – 398 – 1,064 Consolidated net profit/loss €m 76 – 886

Deutsche Postbank AG Total cost/income ratio % 92.7 129.8

Return on equity before tax % – 7.8 – 23.3 after tax % 1.5 – 19.4

Earnings per share € 0.35 – 5.26

Dec. 31, 2009 Dec. 31, 2008 1

Tier 1 ratio % 7.6 7.2

1 Prior-period figures restated (see Note 6) 678 110 008